LUKOIL GROUP SUSTAINABILITY REPORT FOR 2019

RESPONSIBLE energy CONTENTS

2 MESSAGE FROM 4 LUKOIL’S ACTIONS 6 BUSINESS MODEL 8 GEOGRAPHY THE PRESIDENT DRIVEN BY THE COVID-19 OF PRESENCE OF PJSC LUKOIL PANDEMIC Interactive version of Sustainability Report of LUKOIL Group for 2019

10 SUSTAINABILITY 12 MATERIAL TOPICS 14 OUR CONTRIBUTION 16 ABOUT STRATEGY AND ISSUES TO THE UN SUSTAINABLE THE REPORT OF LUKOIL GROUP OF THE REPORT DEVELOPMENT GOALS IN 2019 18 ABOUT THE COMPANY: HIGHLIGHTS OF THE YEAR

20 CORPORATE GOVERNANCE 100 ENVIRONMENTAL PROTECTION 103 Environmental safety program 23 Sustainability and climate change management 106 Water 31 Risk management 34 Ethics and statutory compliance 114 Emissions 35 Human rights 117 Waste 39 Stakeholder engagement 120 Biodiversity conservation Case study. Biodiversity conservation program 44 Supply chain 122 in Uzbekistan

124 OUR EMPLOYEES 46 CLIMATE CHANGE 128 Leadership philosophy 131 Employment and diversity 49 Context: Climate change as our common challenge 132 Social policy 53 Approaches to managing climate change issues 135 Training and development 56 Goals and indicators 58 Energy conservation 64 Renewable Energy Sources 138 SOCIETY 66 Reduction of emissions 141 Product quality and customer relations 144 External social policy priorities 152 Supporting indigenous minorities of the North 68 SAFETY

72 Integrated HSE management system 78 Occupational safety 87 Pipeline reliability and emergency preparedness 92 Case study. The Komi Republic 154 CONCLUSION 96 Case study. Safety of the Arctic Zone, northern territories and offshore facilities 99 Information security 156 APPENDIX w

WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES MESSAGE FROM THE PRESIDENT OF PJSC LUKOIL

The sustainable development management system changed We continue to enhance production safety standards We continue long-term programs to support the territories significantly in the reporting year, with the leading role in all the countries where LUKOIL operates. This covers where we operate and the indigenous minorities for enhancement of LUKOIL Group activities in this area given the occupational safety of our employees and contractors, of the North. The most successful programs, such as the Social to the Strategy, Investment and Sustainability Committee improving the reliability of technological systems and Cultural Projects Competition, include not only Russia of the Board of Directors of PJSC LUKOIL. All issues and equipment, and environmental protection. In 2019 but also the foreign countries where LUKOIL has a presence. on sustainability reviewed at the Board of Directors undergo we continued preparation for transitioning to the new preliminary preparation and discussion in that Committee. international standard ISO 45001:2018, which expanded Our 10th Sustainability Report is being released at a time the requirements for elaborating safety management systems. when the global community is taking its first steps to recover Last year’s results demonstrated a 3.3% decrease in direct GHG We are also stepping up work with contractors in this area. from the COVID-19 virus pandemic. At LUKOIL, we took emissions and almost a twofold decrease in methane emissions prompt measures to protect the health of employees, while in Russia compared to the baseline of 2016, when the first All LUKOIL Group entities continually analyze occupational our plants and filling stations continued working to support target for reducing greenhouse gas emissions for Russian safety indicators, and make maximum efforts to strengthen the economy of regions and countries where we operate. entities was set. Importantly, we managed to achieve this goal measures aimed at preventing injuries. Also, state-of-the- The pandemic has proved how important it is to address while at the same time increasing hydrocarbon production art technologies are being introduced to boost the level a wide range of global problems, including issues relating and refining volumes. The Company also implemented of industrial safety. to sustainable development, and thereby to increase society’s measures to reduce the impact of climate change in its foreign “immunity” to all challenges that may arise. entities. For example, in 2019 the largest LUKOIL gas projects The decrease in basic injury rates among LUKOIL employees in Uzbekistan saw a drop in greenhouse gas emissions of 10.9% and among our contractors in the last five years demonstrates compared to 2018. the effectiveness of our efforts.

These results were achieved due to investments Another achievement of the Company has been a continuous in the modernization and construction of production reduction in oil and petroleum product spills in Russia Vagit Alekperov facilities and infrastructure, as well as the implementation in the past three years – and in 2019 this figure fell by half President, Chairman of the Management of targeted corporate programs. Consequently, the efficient compared to the previous year. Committee of PJSC LUKOIL Dear readers! use of associated petroleum gas (APG) reached 97.6% across all LUKOIL Group production entities, which is close Furthermore, as a result of the implementation Our Company continues to evolve in accordance with the UN to the technological maximum. As a result of modernization of the Environmental Safety Program we reduced pollutant Sustainable Development Goals, which we do not see as being projects and energy efficiency measures, the Energy Intensity emissions, ensured the disposal of all waste generated, distant prospects, but they rather form the basis of our daily Index of our refineries is steadily improving. Oil and gas and reduced the amount of waste accumulated in entities work. production entities are implementing a program for transitioning prior to their joining LUKOIL Group. The Company to energy efficient pumping equipment. Hence, energy is expanding its participation in biodiversity conservation The 2019 reporting year was successful for the Company consumption for production needs is being reduced annually. projects: together with the Ministry of Natural Resources in terms of operational and financial results. And no less of the Russian Federation and the WWF-Russia Environmental significant was that we also took specific steps to overhaul We participate in global industry-specific initiatives Fund, we have launched a joint saiga antelope conservation our system for managing climate change issues. The Board aimed at mitigating the impact of oil and gas companies project in Southern Russia. of Directors of PJSC LUKOIL made important decisions on the climate. Since 2018 LUKOIL has participated in the “Zero to facilitate mitigation of climate change, including setting Routine Flaring by 2030” World Bank initiative, and currently We are increasing the scope of education programs quantitative targets to reduce greenhouse gas emissions we are implementing two infrastructure building projects for our employees through the use of modern distance- and conducting inventories of sources of direct and indirect at our fields for APG collection and utilization. learning tools, which have become especially important during emissions. Assessment of the impact of climate change the coronavirus pandemic. In 2019 LUKOIL employees spent on production facilities and infrastructure in the Arctic about two million hours using distance training in corporate and permafrost zones is planned. programs.

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LUKOIL’S ACTIONS DRIVEN BY THE COVID-19 PANDEMIC

During the preparation of this Report months (a portion of specialists involved management, psychological resilience Saratov, Sverdlovsk, Tyumen, In the Perm Territory, LUKOIL-PERM The above measures do not represent in March 2020, the COVID-19 pandemic in the West Qurna-2 project had during the lockdown period and other Chelyabinsk, Orenburg and Samara arranged for 3 meals per day free-of- by any means an exhaustive list was already beginning to spread returned home before the active stage topics were held, and employees regions, as well as in the republics charge to be delivered to the workplaces of measures actually taken by LUKOIL globally affecting many countries, of the pandemic began). At distant experiencing unusual stress were given of Tatarstan, Bashkortostan, Karelia, of the medical staff of the Perm entities, our charity fund and President including Russia. production facilities, the Company the opportunity to obtain the advice Udmurtia and in the Khanty- Territorial Clinical Infectious Hospital. of PJSC LUKOIL V.Yu. Alekperov. arranged for the transportation of psychologists remotely. Mansi Autonomous Area – Yugra. Over 400 sets of protective equipment We will continue providing help Shortly after the first notifications of employees to local healthcare centers In the Khanty-Mansi Autonomous and portable radio sets to facilitate as required to countries and regions regarding the growing threat when required. To unite and consolidate all Area – Yugra, we also remitted cash communication between specialists where we operate, thus further of large-scale infection, LUKOIL employees, a special “MYVMESTE” funds to the Regional Development of the infectious department and those consolidating the ties between took measures to protect the health Because of the ongoing nature (“We are in this together”) channel Fund to combat the spread of infection. of other departments were handed LUKOIL and the local communities of its employees by preventing further of their operations, all of the Company’s was created, and virtual hobby clubs The Kogalym plant producing chemical over to medical professionals. Fuel and combining our efforts. More contagion. For immediate response plants continued functioning. For those were launched. Several corporate reagents partially repurposed its output was provided at no cost to volunteer detailed information will be presented and coordination, PJSC LUKOIL who remained at their workplaces, activities have now moved to the virtual to manufacture disinfectants which were organizations and needy multi-member in future Reports. and all Group entities created command conditions to secure physical distancing space (such as the competition distributed across the region. families. centers which were put in charge of daily to the maximum extent possible were for young professionals). For families We are confident that monitoring and situation awareness. created; the number of production with children, we tried to assist In the Komi Republic, LUKOIL-Komi In foreign countries (Azerbaijan, the experience of overcoming personnel working in shifts was reduced; with one of the most difficult issues helped streamline and increase Bulgaria, Iraq, Moldova, Mexico, the pandemic will help strengthen From the very start of the pandemic, and schedules of office-wide on-call duty during the lockdown period – how the production of personal protective Romania, Serbia, Turkey, Croatia the Company’s response to such enhanced sanitary protection measures were introduced. To protect fuel station to keep children occupied. Jointly equipment for healthcare professionals and Uzbekistan), the Company events in the future. Safeguarding were implemented across offices operators, protective shields were with the Higher School of Economics, (100 thousand masks and 1.5 thousand transferred much needed equipment, people’s health and making it possible and enterprises. These included installed at all sites. we elaborated an online project “HSE protective suits). Help was also supplied protective suits and disinfectants to local to restore a safe work environment frequent cleaning and anti-bacterial for Kids” children’s camp which includes to the Department of Infectious healthcare facilities and provided at our production sites are LUKOIL’s top ultraviolet light treatment of premises, Over 20 thousand employees began educational, entertainment and sports Diseases of the Usinsk Central Hospital fuel free-of-charge to medical teams. priorities. as well as disinfection of work spaces. working from home. For many activities. in the form of oxygen and compressed At the Company’s gas stations, medical Employees were provided with masks; of them, it was a good opportunity air and a Wi-Fi network development. professionals were served coffee free antiseptic dispensers were installed to apply the wide variety of corporate We also assisted countries and Russia’s During the most acute period of charge. Support was also rendered in premises; and ongoing monitoring digital tools and services in practice. regions where our entities operate. of the pandemic, LUKOIL’s gas stations to medical scientific institutes to assist of body temperature and the state To facilitate the transition and adaptation This support program was deployed provided free fuel to ambulances in research aimed at discovering of employees’ health were introduced. to the new conditions, the AR LUKOIL in 22 constituent entities of the Russian from 18 healthcare facilities. ways to combat the novel virus. mobile application was developed Federation and in 12 foreign countries. The veterans of the Great Patriotic War In Italy, we arranged to send supplies We canceled all business trips and integrated on a tight deadline and disabled people were given special of specialized equipment to intensive to foreign countries and minimized to raise the awareness of the tools Protective equipment and disinfection care and financial support. President care units at local hospitals. In the United movements of our employees across available and to train employees both means were purchased for healthcare of PJSC LUKOIL transferred his personal Arab Emirates (UAE) LUKOIL paid Russia’s regions. Production companies in Russia and abroad. In April alone, facilities, and fuel was provided funds to the Republic to help local for the accommodations of Russians who in Russia, Uzbekistan and Iraq extended 14 webinars devoted to methods for medical transport at no cost bodies and individuals address the most were unable to return home because air the term of rotation shifts up to three of arranging work from home, time in the Astrakhan, Volgograd, Kirov, pressing challenges. travel was suspended.

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LUKOIL is a global vertically integrated company accounting for around 2% of global oil production BUSINESS MODEL and around 1% of proved hydrocarbon reserves. REFINING 6 COUNTRIES OF THE WORLD EXPLORATION AND PRODUCTION Our refineries product mix is used as fuel for various means of transport, as well as feedstock for other 89% Exploration Oil refinery yield industries. LUKOIL is a leader by proved liquid hydrocarbon reserves and by proved reserves to production ratio. The majority Oil refining of LUKOIL reserves are of conventional 14 1 type. COUNTRIES 4 oil refineries in Russia and 4 – in Europe . OF THE WORLD • Products: motor fuel, lubricants and bitumen, bunker and jet fuel Gas processing 76% Offshore projects share of oil (0.3 to 3,000 m ) 4 gas processing plants and 2 processing facilities and onshore at other plants in Russia.

reserves • liquid hydrocarbon and marketable gas 24% in proved projects share of oil Petrochemicals 2 petrochemical plants in Russia and 2 production Around Development and production facilities at European oil refineries. 17% • pyrolysis and organic synthesis products, fuel We develop reserves located, inter fractions and polymeric materials alia, in major oil and gas provinces share of international in Russia, Uzbekistan and Iraq, projects production producing liquid hydrocarbons in total hydrocarbon (oil and gas condensate), natural production and associated petroleum gas. 1 LUKOIL owns a 45% share in the Dutch • Climate zones: refinery from subarctic to equatorial • Leadership in development of hard-to-recover reserves in Russia

MARKETING POWER GENERATION AND >100 The power generation sector Thermal power plants DISTRIBUTION COUNTRIES OF THE WORLD is represented by a complete chain and boiler houses in the south LUKOIL is a major crude oil and marketable gas trader and a supplier from generation to transmission of Russia, 4 hydroelectric of premium quality fuels and lubricants. and sale of thermal and electric power plants, solar and wind energy to external consumers. power generation stations International trading: lubricants production Electric power generation wholesale marketing of our crude and marketing: oil and petroleum products, trading 35 production facilities, 71% 29% third-party hydrocarbons over 800 types of lubricants commercial supporting Marine ​​and river generation power generation bunkering Retail sales: fuel stations 19 Aircraft refueling 6% RES share in total commercial network countries power generation of the world 6 7 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

THE ARCTIC RUSSIA GEOGRAPHY • APPLYING THE BEST AVAILABLE TECHNOLOGIES, PIT- OF PRESENCE FREE DRILLING 1 Austria • CONSTRUCTION OF PILE-SUPPORTED 2 Azerbaijan PIPELINES WE OPERATE In Russia, we work OVER PERMAFROST 3 Belarus in over 60 Russian TERRAIN 4 Belgium in over 84% entities. Extensive • PERFORMANCE OF STAFF experience of working THE KRASNOYARSK STANDARDS 5 Bulgaria is employed TERRITORY ACCORDING 30 1 in Russia in a multinational THE BARENTS TO KONKRAFT REPORT 6 Ghana countries SEA environment is our SEA RECOMMENDATIONS of the world 7 Georgia 11% competitive advantage. OF STAFF 20 8 Egypt on 4 is employed THE KOMI REPUBLIC, continents in Europe THE NENETS AUTONOMOUS AREA, 9 Iraq THE YAMAL-NENETS AUTONOMOUS AREA, THE KHANTY-MANSI AUTONOMOUS AREA - YUGRA 10 Spain OFFSHORE PROJECTS 11 Italy 28 INDIGENOUS 12 Kazakhstan PEOPLES 13 Cameroon • ‘ZERO DISCHARGE’ PRINCIPLE • THE KHANTY, MANSI, BALTIC SEA Russia NENETS, SELKUP, 14 Luxembourg • SATELLITE THE ENERGY OF WATER DOLGAN, NGANASAN MONITORING 15 Macedonia AND THE SUN PEOPLE OF MARINE AND COASTAL 19 • ECONOMIC 16 Mexico ECOSYSTEMS AGREEMENTS 3 WITH INDIGENOUS 17 Moldova 4 PEOPLE 14 18 Nigeria 25 12 • HISTORICAL AND CULTURAL AREA 19 Netherlands SURVEYS THE SEA 16 1 20 Norway 17 OF AZOV 27 21 UAE 23 The Republic 22 10 11 29 24 of the Congo THE BLACK 23 6 5 SEA 7 ARID Romania 13 30 18 15 2 REGIONS 24 Serbia 21 THE CASPIAN GULF  • USE 25 The USA OF GUINEA 22 26 SEA OF WATER-EFFICIENT TECHNOLOGIES 26 Turkey • SUPPLIES OF CLEAN POTABLE WATER 27 Uzbekistan REGULATION RENEWABLE TO SCHOOLS, 28 ENERGY ORPHANAGES, HEALTH Finland ON CLIMATE CARE CENTERS 29 Croatia 9 • HPP MODERNIZATION • MODERNIZATION • GHG EMISSIONS OF WATER SUPPLY 30 Montenegro REDUCTION PROJECTS • PROMOTION INFRASTRUCTURE • CDP PROJECT OF HIGHER ENGINEERING 8 REPORTING EDUCATION IN THE AREA OF RENEWABLE Exploration Oil production Oil refining Petrochemicals Power generation Aircraft refueling ENERGY SOURCES Gas production Gas processing Distribution Throughput Lubricants

1 8 Of the headcount as at December 31, 2019 9 w

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Our approach to managing sustainability is based on alignment of the Company’s interests and plans with the United Nations sustainable development principles, universal values, global SUSTAINABILITY STRATEGY trends, as well as national and regional development priorities. OF LUKOIL GROUP

INDICATORS UNDER OTHER STRATEGIC SUSTAINABLE DEVELOPMENT GOALS OF LUKOIL GROUP SDGs KPIs UNCTAD INDICATORS PLANS REPORTING REPORTING SYSTEMS GUIDELINES Our absolute priorities at all levels of the value The efficient use • Further increase in the APG use chain are issues of industrial, of APG reached1 We are committed to improving • Further implementation environmental, social, INDUSTRIAL 97.6% throughout of industrial and environmental GRI industrial safety, reducing on-the- as well as the personal safety AND ENVIRONMENTAL LUKOIL Group Russian entities cut safety programs IPIECA job injury rates, ensuring accident- The lost time injury frequency their air pollutant emissions UNCTAD of employees of LUKOIL Group SAFETY, RELIABILITY free operation of our production rate (LTIFR) stood at 0.13 • Further introduction of safety The lost time by 7.2% SASB entities and improvement AND EFFICIENCY facilities, and continuously reducing culture tools accident frequency RSPP of the safety culture OF PROCESSES our environmental impacts • Development of cooperation rate (LTAFR) in the supply chain. with contractors in the area amounted to 0.19 of occupational health and safety

Refinery • Development of further yield2 – 89.4% long-term goals to reduce • As compared to 2016 • The refining depth GHG emissions; preparing As compared (the base year), methane (the Nelson Index) the inventory of GHG emissions to 20143, the EII index emissions decreased for LUKOIL Group • Further implementation by 46%, and GHG emissions We are focused on boosting our overall (Solomon) decreased refineries rose up to 9.1 of the energy conservation GRI operational performance and achieving to 96.5% dropped 3.3% across IPIECA LUKOIL GROUP’S • The Information Strategy program COMPETITIVENESS more rational use of resources (natural, Russian Entities UNCTAD of LUKOIL Group is being • Further improvement STRATEGIC human, production, and financial) The energy intensity • The share of electric power SASB implemented in the efficiency of processing of refining one tonne generated from renewable GOALS • Project teams have been raw materials and modernization of basic raw material sources in 2017–2019 formed of the product mix at petrochemical averaged 6% • Further introduction of leadership plants amounted tools into HR management In 2017, to 270 kWh/t the Board of Directors of PJSC LUKOIL • The share of LUKOIL determined four strategic Group employees covered goals of LUKOIL Group by collective agreements • Employees • Implementation of programs in the area of sustainable SOCIAL We take a very responsible attitude equaled 88.9% of LUKOIL Group received to improve operational efficiency, towards our stakeholders and always Specific revenue • Share of young employees over 300 thousand digitalization and investment development that RESPONSIBILITY, 4 GRI take their needs into account. We pursue (labor productivity) in the total LUKOIL Group health-related services programs can be aligned A WORTHY IPIECA a responsible social policy towards amounted to employee headcount was 37% • The share of local managers • Formation of key management with 11 UN Sustainable UNCTAD CONTRIBUTION our employees and make a significant RUB 77 million/ • The amount of training in foreign entities of LUKOIL personnel Group was 33%5 SASB Development Goals TO SOCIAL contribution to improving living standards person reached over 258 thousand • Further implementation of social and 15 targets. DEVELOPMENT in the regions where we operate person-courses • 785 projects in Russian and economic development • External social support regions received support programs in regions contributions in LUKOIL Group We implement many were RUB 9 billion programs and annually disclose their results in public reports. We follow a flexible reinvestment • Implementation of programs The 2019 results policy, work constantly to improve to improve operational efficiency, demonstrate that RETURN ON EQUITY, our performance and foster technological The free cash • The dividends paid digitalization and investment RETURN ON INVESTMENT, development. Thanks to successful flow was The revenue of LUKOIL Group on shares amounted programs the Company is evolving to RUB 180.7 billion, AND CONTINUOUS implementation of our strategy, RUB 702 billion, stood at RUB 7,841 billion • Improvement of corporate thanks to continuous a rise of 14.1% on 2018 CREATION we maintain our competitive advantages, up 26% on 2018. governance improvement create shareholder value, and boost of its sustainability OF SHAREHOLDER the Company’s investment appeal performance. VALUE

1 Indicators dynamics is assessed in relation to 2018, unless otherwise indicated. Comparison with indicators for a longer period is caused by specific 4 A service provided to an employee under social programs is the provision of the relevant service at the employee’s request or the provision indicators. of an amount of money to pay for the service or compensate for its cost. 2 The indicator relates to the processing of raw materials by LUKOIL Group entities at its own refineries (excluding mini-refineries). 5 The indicator is calculated using the number of senior managers. 3 10 Starting from 2014, the list of organizations covered by the study has changed while the scope of the study has remained unchanged. 11 w

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TARGET TARGET TARGET

TARGET TARGET TARGET а MATERIAL TOPICS CLIENTS. SUPPLIERS AND CONTRACTORS TARGET TARGET TARGET AND ISSUES OF THE REPORT SUSTAINABLE DEVELOPMENT MANAGEMENT, ETHICS AND TARGET TARGET HUMAN RIGHTS 1 CLIMATE CHANGE 2

Based on the results SAFETY 3 EMPLOYEES of a comprehensive analysis, AND TRADE UNIONS six topics were identified ENVIRONMENTAL as material for public PROTECTION 4 reporting purposes: RESPONSIBLE SOCIAL POLICY 5 KEY GROUPS 1 sustainable development management, ethics SOCIETY 6 OF STAKEHOLDERS and human rights;

1 3 5 6 2 climate change; KEY INQUIRIES Clients SHAREHOLDERS RECEIVED FROM Suppliers and Contractors 3 safety; AND INVESTORS STAKEHOLDERS 4 environmental protection; IN 2019 1 2 3 5 6 Employees and trade unions 5 responsible social Indigenous minorities of the North policy (human resources 1 2 3 4 5 6 The quality of products and services management); Programs for regions, Social and Cultural Projects Competition Shareholders and investors Leadership philosophy 6 society (local communities Training 2 4 and indigenous minorities Remuneration and bonuses State legislative Working environment, collective agreements of the north). STATE LEGISLATIVE and executive authorities Emissions and Waste AND EXECUTIVE Biodiversity and Ecosystems AUTHORITIES Water 1 2 3 4 6 Environmental Safety Society: local authorities, media, Digitalization, cybersecurity state, municipal, public organizations, Workplace safety environmental organizations and the public, Information on the procedure Industrial Safety and Oil Spills residents of the regions where LUKOIL for determining material topics is given GHG emissions, reduction of emissions operates, expert and scientific communities, in Appendix 2. Climate Strategy and Reporting SOCIETY international initiatives and industry Stakeholder Engagement associations, indigenous minorities For more details, see p. 158 Human Rights of the North Ethics, corruption Corporate governance

INITIATIVES European Business Network «Zero Routine Flaring United Nations Collaboration agreement for 2018– The initiative “Business for Corporate Social by 2030» Initiative Global Compact 2022 between the International and Biodiversity” within International projects, Responsibility of the World Bank and UN Labor Organization and Public the framework of the federal programs and initiatives Joint-Stock Company «Oil project of Russia “Conservation LUKOIL Group / PJSC LUKOIL Company «LUKOIL». of Biological Diversity participates in and Development of Ecotourism”.

12 13 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES OUR CONTRIBUTION TO THE UN SUSTAINABLE DEVELOPMENT GOALS IN 2019

TOTAL INVESTMENTS IN ACHIEVING THE OUR PROGRAMMS OUR PROGRAMMS OUR PROGRAMMS • A comprehensive program of interaction between • Personnel costs (remuneration • Environmental Safety Program UN SUSTAINABLE LUKOIL Group entities and institutions of higher and social programs) of LUKOIL Group entities, Biodiversity DEVELOPMENT GOALS education in the oil and gas, chemical and energy conservation subprogram areas • The costs for improvement of workplace environment • Industrial environmental control IN 2019 • Support programs for students and teachers of higher and labor protection, reducing • Emergency Prevention and Response and secondary education organizations in Russia injuries and occupational illnesses TARGET 4.4 TARGETS TARGETS • Biodiversity Conservation Program • Charity support for schools and educational 8.3, 8.8 institutions / centers 14.1, 14.5 for the Company’s facilities operating in the Arctic zone of the Russian EXPENSES EXPENSES 218.1 • Personnel education programs Federation RUB BILLION 1,172 151,586 RUB million RUB million EXPENSES 13,493 • We share the ILO standards for decent OUR PROGRAMMS RUB million and productive work for women and men • Program of scientific and technical in terms of equal opportunities, providing social works guarantees and respect for human dignity. • Digital Development Programs Taking into account the strategic as part of the Information Strategy • Environmental Safety of LUKOIL Group Program, Biodiversity guidelines of LUKOIL Group, and Remediation subprogrammes the Company’s experience TARGET 5.5 TARGET 9.4 in implementing environmental and industrial safety programs, EXPENSES social programs for employees 6,723 of our entities and for the regions RUB million TARGET 15А in which our enterprises operate, EXPENSES as well as the expectations OUR PROGRAMMS of interested parties, 1,088 • LUKOIL Group entities Environmental Safety • Environmental Safety Program RUB million we have identified 11 priority UN Program, Clean Water subprogram of LUKOIL Group entities, Sustainable Development Goals • Charity projects and programs Waste subprogram and 15 Targets. • Social and Cultural Projects Competition («Ecology» nomination) OUR PROGRAMMS TARGETS • Volunteer actions to clean up river banks • Participation in the World Bank 6.3, 6.4 from garbage. TARGET 12.5 and UN project These goals and targets • Projects related to provision of drinking water • Membership in the UN Global EXPENSES EXPENSES are harmoniously combined 2,611 in foreign countries Compact Initiative with operational programs RUB million 3,352 implemented by LUKOIL Group RUB million TARGET 17.17 entities, and are part of corporate planning and budgeting. EXPENSES Therefore, we believe that OUR PROGRAMMS OUR PROGRAMMS 8,236 RUB million their implementation, alongside • RES Development Projects • The Environmental Safety Program other steps taken by the Company, • Energy Conservation Programs of LUKOIL Group of LUKOIL Group, Clean Air largely determines the contribution “LUKOIL contribution to the attainment entities subprogram of the UN Sustainable Development LUKOIL Group makes to achieve • Program for the rational use Goals” brochure the UN global Sustainable of APG of LUKOIL Group entities Development Goals. TARGETS 7.2, 7.3 TARGET 13.1

EXPENSES EXPENSES 4,973 24,912 RUB million RUB million

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ABOUT THE REPORT STRATEGIC ENVIRONMENT In 2019, several reports were published on the progress towards achieving the UN Sustainable Development Goals (SDGs)1 that analyzed the positive developments and challenges during the year after publication of the previous report2. The documents PJSC “LUKOIL” (hereinafter PJSC LUKOIL) is pleased to present the tenth highlight a number of positive trends that attest to the effectiveness of actions taken by states and companies. Sustainability Report of the LUKOIL Group (hereinafter the LUKOIL Group is referred to as LUKOIL Group) (the “Report”) summarizing performance for the period from 1 January 2019 to 31 December 2019. The previous report was published in July 2019 (for the reporting period from 1 January 2018 to 31 December 2018).

At the same time, the reports highlight areas in 2019 Since 2014, LUKOIL Group has been Progress has been made in providing where no significant improvements have been made In preparing this Report, we used the following non-financial consistently ranked among the top clean drinking water to more people and that require special attention in order to take more reporting standards and guidelines: ten companies in the Responsibility dynamic action. Four out of 17 SDGs are considered to be and Transparency and the Sustainable the most important areas of focus: combating climate Development Vector Indices compiled • Business Reporting • The United Nations Global Compact change (SDG 13 “Climate Action”), reducing inequalities by the Russian Union of Industrialists on the Sustainable Development (SDG 10 “Reduced Inequalities”), protecting biodiversity and Entrepreneurs (RSPP) based Goals (SDGs) • The Basic Performance (SDG 15 “Life on Land”), and solving the problem of waste on the analysis of public reporting Indicators and the Responsibility Access to energy is becoming easier (SDG 12 “Responsible Consumption and Production”). of Russia’s 100 largest companies • Global Reporting Initiative (GRI) and Transparency and the Sustainable and stock market indices (the MOEX – Sustainability Reporting Standards Development Vector Indices According to the 2019 reports, climate change has RSPP Responsibility and Transparency (“Core” option). The table of the Russian Union of Industrialists a cumulative effect that poses risks for countries, Index and MOEX – RSPP Sustainable of standard general and specific and Entrepreneurs (RSPP) companies, and people. Labor productivity is growing, while Development Vector Index). GRI disclosures and individual GRI indicators are provided unemployment is decreasing Inequality continues to exist in many ways, including We have been publishing sustainability in Appendices 3 and 4 respectively uneven distribution of value added among different reports since 2005. They are addressed factors of production, which leads to a lower share to a wide range of stakeholders and seek of the national product attributable to labor. to provide balanced information relevant to the interests of each stakeholder New technology is being introduced So, too, the rate of biodiversity loss has increased group. The Company pays significant significantly, including land degradation, forest loss, We also used the following reporting platforms: to stimulate international trade attention to corporate governance and loss of unique ecosystems. of sustainability issues and continuously strives to improve the quality of reported • Guidance on Core Indicators • IPIECA (International Petroleum Global consumption of resources is growing faster than information. We believe that independent for Entity Reporting on Contribution Industry Environmental Conservation population and global production, which means that audits of disclosed information Towards Implementation Association) Oil and Gas Industry the efficiency of their use is consistently low. This is also and external assurance of the Report of the Sustainable Development Guidance on Voluntary Sustainability Investment in combating climate evidenced by a significant increase in waste generation. contribute to these objectives. The audit Goals, UNCTAD, 2019 Reporting, 2019 change has increased, the uptake Much of this waste appears as a result of irreversible firm’s opinion is published on page 175. of renewables has accelerated, removal of natural wealth from the environment. The conclusion of the RSPP Council • SASB (Sustainability Accounting and new carbon sequestration on Non-Financial Reporting concerning Standards Board) reporting and capture technology has been A group of independent scientists3 warns that the external assurance of the Report standards – material topics developed the overlapping of negative trends would lead is published on page 179. and individual indicators to irreversible changes in the Earth’s conditions. Experts expect that investment analysis methodologies used by investors and professional investment managers will include not only ESG indicators that are already widely used, but also data on companies’ contribution to implementation of the SDGs.

Throughout this document, The list of abbreviations, Previous reports formulas for calculating a number are available the words “LUKOIL Group,” “LUKOIL,” of indicators, and definitions on PJSC LUKOIL’s “the Company,” “the Group,” of terms are given in Appendix 7. website at: the pronoun “we” and its various 1 Sources: The Future is Now. Science for Achieving Sustainable Development. Global Sustainable Development Report 2019. UN Department related forms refer to PJSC LUKOIL See page 172 of Economic and Social Affairs, 2019. and LUKOIL Group entities, unless 2 The Sustainable Development Goals Report, 2018. specified otherwise. 3 Source: The Future is Now. Science for Achieving Sustainable Development. Global Sustainable Development Report 2019. UN Department of Economic and Social Affairs, 2019. 16 17 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

You can find more information of finished products. The launch to this project, the capacity of the plant about LUKOIL Group’s operational of this plant will help optimize logistics reached 48 MW. The Company decided and financial performance in Central Asia. Biodegradable hydraulic to construct the second solar power in the Company’s financial reports: and metalworking fluids are being plant (SPP) with a capacity of 20 MW ABOUT THE COMPANY: developed, including special hydraulic at the Volgograd Refinery (LLC LUKOIL- oils that can be used in Arctic conditions. Volgogradneftepererabotka). Pilot HIGHLIGHTS OF THE YEAR projects to construct digital substations The Power Generation business sector were continued. Public Joint-Stock Company “Oil company “LUKOIL” (hereinafter PJSC LUKOIL) is one is represented by a complete vertically integrated chain, from generation The Corporate and Other business of the world’s largest publicly traded, vertically integrated oil and gas companies to transmission and distribution of heat segment includes PJSC LUKOIL in terms of total proved reserves and hydrocarbon production. PJSC LUKOIL and power to external consumers and other entities. One of the main The Annual Report of PJSC LUKOIL is the Corporate center of LUKOIL Group. LUKOIL Group entities employ (commercial power generation) functions of the corporate center for 2019: over 100 thousand people across Russia, Europe, Asia, Africa, and the Americas (more and for operational needs (supporting is to coordinate and manage power generation). The aggregate organizational, investment, and financial than 30 countries worldwide). We strive for technological leadership and ecological installed capacity of our power processes at the Company’s subsidiaries. balance so that all of us can share in a prosperous future. generating facilities1 was 6.4 GW2, including the combined capacity of renewable power generating facilities of 0.4 GW. Full list of LUKOIL Group entities LUKOIL Group’s operations In 2019, the Company completed in accordance with IFRS is given The Analyst Databook for 2019 : in Appendix 1. and financial activities a significant project for this business are coordinated from its head sector – renovation of Belorechensk EXPLORATION REFINING, CORPORATE See page 156 office located in Moscow Hydro Power Plant (HPP). Thanks in the Russian Federation. We AND PRODUCTION MARKETING AND OTHER divide our operations into AND three business segments: DISTRIBUTION

Key financial and operational indicators

2017 2018 2019 EXPLORATION AND PRODUCTION Financial The Company has a high-quality production increased by 0.4% year-on- a stake in the deep-water Marine Revenue, RUB billion 5,937 8,036 7,841 portfolio of assets diversified both year due to production growth at its XII project in the Republic EBITDA, RUB billion 832 1,115 1,236 geographically and by type of reserves. fields in the Caspian Sea and larger of the Congo; the Company also joined Our proved reserves of oil and gas production of high viscosity crude oil the Gasha concession in the Persian Total debt to EBITDA, % 74 48 45 are mostly conventional. In 2019, they in Timan-Pechora. Gulf and the Zhenis block project Capital expenditures, RUB billion 511 452 450 amounted to 15.8 billion BOE1, 24% in the Republic of Kazakhstan. of which were gas. The Company’s In 2019, LUKOIL expanded Free cash flow, RUB billion 247 555 702 proven reserve life is 18 years. its participation in foreign Research and development costs, RUB billion 6 6 6 In 2019, the Company’s annual oil projects: the Company acquired Number of patents received, patents 20 37 30 Labor productivity, RUB million / person 57 78 77 REFINING, MARKETING AND DISTRIBUTION Operational Production of oil and gas condensate (including the share in associates), million This business segment includes as compared to 2018. The Company LUKOIL is developing production of new 645 644 646 organizations2 whose operations continued increasing the refinery yield products, including next-generation barrels of oil equivalent relate to refining of hydrocarbons; and interfactory integration. The share bitumen. As part of this project, Crude oil production (including the share in associates), thousand tonnes 87,414 87,124 87,488 transportation; wholesale and retail of fuel oil in the product mix continues a modern bitumen materials research Gas production, million cubic meters 28,861 33,543 35,046 trade and trading; and generation to decrease, with the growth of light center was opened in the Nizhny of electricity and heat. products share. At the Volgograd Novgorod Region. • including APG 8,942 8,772 9,548 Refinery, the production of low-sulfur Output of petroleum products, thousand tonnes3 69,908 70,188 69,296 In 2019, refinery throughput at LUKOIL’s marine fuel oil has begun, which In the reporting year, a new lubricants own refineries in Russia increased complies with the requirements plant was commissioned in Kazakhstan. Lubricants production (full cycle), thousand tonnes 998 961 963 by 2.2% and by 1.9% in European entities of MARPOL. Its capacity is 100 thousand tonnes Output of marketable petrochemicals, thousand tonnes 1,171 1,246 1,137

1 According to the classification of the Securities and Exchange Commission (SEC); BOE – barrels of oil equivalent. 1 The total electric capacity of the Group’s entities takes into account facilities owned by the Company but leased out to other legal entities. 2 This business segment includes several business sectors, such as: “Oil refining in Russia,” “Oil refining abroad,” “Petrochemicals,” “Oil product supply 2 The data do not include the West Qurna-2 project. in Russia,” “Oil product supply abroad,” “Transportation,” and “Other entities from the Refining, Marketing and Distribution business segment.” 3 At own, affiliated, and third-party refineries (according to the Group’s share).

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CORPORATE GOVERNANCE

23 SUSTAINABILITY AND CLIMATE CHANGE MANAGEMENT 31 RISK MANAGEMENT 34 Q WHAT DO YOU THINK ABOUT THE CHANGES Q WHAT CHANGES DID ETHICS AND STATUTORY TO THE SUSTAINABILITY MANAGEMENT THE SUSTAINABILITY TASK COMPLIANCE SYSTEM IN 2019? FORCE SEE? 35 HUMAN RIGHTS A Significant efforts were made last year to develop A The Sustainability Task Force has the heads the corporate sustainability management system, of the Company’s dedicated divisions as its members. and we are already getting positive feedback on those The goal of the Task Force is to coordinate the efforts Evgeny changes from our stakeholders. The Board of Directors, of its members and to develop a united position Khavkin together with the Strategy, Investment, and Sustainability on sustainable development issues. In 2019, independent 39 Committee, initiated defining system-wide activities members of the Board of Directors and external experts STAKEHOLDER Vice President — and tasks, both for the near and long term. At meetings and advisers took part in the Sustainability Task Force’s ENGAGEMENT Chief of Staff the governing bodies reviewed the most pressing issues meetings, which had a significant positive impact of PJSC LUKOIL concerning environmental and industrial safety, and risk on the level and quality of discussions and expanded management, with a special focus placed on climate change. the range of matters discussed. The expansion of the Task We intend to proceed with these efforts and believe that Force’s functions testifies to the high importance the Company’s key task is to achieve meaningful results, both of sustainability matters to the Company. 44 for shareholders and society in general. SUPPLY CHAIN WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

SUSTAINABILITY AND CLIMATE CHANGE MANAGEMENT

THE REPORTING YEAR’S CHANGES The management system was modified in 2019, bringing real improvements AND RESULTS INCLUDE in management systems and processes as well as disclosure approaches.

AN INCREASE IN THE NUMBER THE BOARD OF DIRECTORS Sustainability management system structure at PJSC LUKOIL OF BOARD MEETINGS WHERE MADE A DECISION TO SET SUSTAINABILITY MATTERS LONG-TERM CLIMATE GOALS MANAGEMENT AREAS OF SUSTAINABILITY WERE DISCUSSED LEVEL EFFORTS

The Board of Directors Issues regularly considered at the Board of Directors’ meetings include of PJSC LUKOIL the following: THE BOARD OF DIRECTORS THE FUNCTIONS • Climate change — NEW ; ENHANCED ITS OF THE STRATEGY, INVESTMENT • Assessing the results of the Environmental Safety and the Industrial Safety ENGAGEMENT AND SUSTAINABILITY Chairman: Valery Grayfer1 Programs, Better Working Environment, Emergency Prevention and Response WITH INVESTORS COMMITTEE WERE Program; ON SUSTAINABILITY EXPANDED • Review of issues related to the HSE at LUKOIL Group; AND CLIMATE ISSUES • Review of information on major incidents and accidents, their causes, the results of response measures, as well as actions taken to mitigate similar risks in the future

The Committee is, among other things, responsible for: A SUSTAINABILITY THE NUMBER The Strategy, Investment MANAGEMENT FUNCTION OF SUSTAINABILITY and Sustainability • preparing recommendations for the Board of Directors on the following: WAS INTRODUCED TASK FORCE MEETINGS Committee – strategic goals in sustainable development, including climate agenda, AT THE MANAGEMENT INCREASED AND THE RANGE of the Board of Directors industrial safety, environmental activities and social responsibility, COMMITTEE LEVEL OF ISSUES DISCUSSED of PJSC LUKOIL – integration of those goals into the Strategic Development Program EXPANDED of LUKOIL Group – NEW , – enhancement of the corporate governance system, Chairman: Sergei Shatalov, – development and evaluation of the Company’s engagement an independent member with stakeholders on sustainability matters — NEW , of the Board of Directors – improvement of the quality of disclosures in LUKOIL Group’s Sustainability Igor Ivanov, an independent Report, member of the Board – consideration of sustainability reporting, including LUKOIL Group’s of Directors, held this position Sustainability Report; until 20 June 2019 • monitoring of the improvement of HSE management system procedures; • analyzing the causes of incidents and accidents; • monitoring relations with stakeholders; • evaluating the effectiveness of the Company’s long-term activities

1 Valery Grayfer was a Chairman of the Board of Directors of PJSC LUKOIL until 24 April 2020 (date of death). During the preparation of the Report Ravil Maganov was appointed Chairman of the Board of Directors by resolution of the Board of Directors of PJSC LUKOIL (Minutes No.11 dated 23 June 2020).

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MANAGEMENT AREAS OF SUSTAINABILITY MANAGEMENT AREAS OF SUSTAINABILITY LEVEL EFFORTS LEVEL EFFORTS

NEW The Audit Committee The Committee, among other things, oversees: The Vice President for Sustainability is responsible for: of the Board of Directors • processes used to ensure reliability and efficiency of the risk management Vice President • organization and development of a single corporate position; and internal control system; of PJSC LUKOIL for Sustainability • coordination of works related to the creation and implementation of unified • procedures ensuring compliance with the requirements of applicable laws, corporate information policy on sustainability; corporate ethical standards, rules and procedures, as well as stock exchange • ensuring interaction and coordination of collaboration among structural units; requirements; Chairman: Viktor Blazheev, • organizing and ensuring engagement with all stakeholders; • whisteblowing procedures for potential bad faith actions on the part Evgeny Khavkin, a member an independent member of LUKOIL Group employees and third parties, or other violations of PJSC LUKOIL Management • development of internal regulations and a regulatory framework; of the Board of Directors Committee, Vice President, Chief • organizing activities of the Sustainability Task Force, development of its work of Staff of PJSC LUKOIL plans, and monitoring the implementation of its decisions; • preparation of proposals on the improvement of the sustainability management system and practices at PJSC LUKOIL and other LUKOIL Group entities

The Human Resources The Committee is, among other things, responsible for: The Corporate Secretary The Corporate Secretary of PJSC LUKOIL and the Office of the Corporate and Compensation • preparation of proposals for the Board of Directors on the development of PJSC LUKOIL Secretary are responsible for: Committee of the corporate HR policy; • engagement with the Board of Directors and Board committees on sustainable development issues; of the Board of Directors • annual review of the Board of Directors and its members’ performance; • initiating actions to improve the quality of sustainability management to ensure • developing and revising periodically the Compensation Policy for members Natalia Podolskaya of PJSC LUKOIL of the Board of Directors, the Management Committee, and the President better integration of sustainability issues into business processes; of the Company, and also monitoring implementation • participation in coordinating sustainability reporting efforts; • participation in stakeholder engagement, including preparation of responses Chairman: Roger Munnings, to shareholder and investor requests regarding the Group’s sustainability an independent member performance. of the Board of Directors

NEW The Management The Management Committee is responsible for the management The Sustainability Task Force (hereinafter the Task Force) sets goals of LUKOIL Group’s day-to-day operations. and contributes to developing a single corporate position on relevant Committee The Sustainability Task sustainability and climate change matters at its meetings. The range of matters of PJSC LUKOIL 1 discussed was expanded in 2019, which is reflected in the Task Force’s new name. The matters discussed by the Management Committee at its meetings Force include but are not limited to: The Sustainability Task Force is responsible for: • the progress and implementation of the Strategic Development Program President, Chairman and development plans and approval of their results; Head: Evgeny Khavkin, a member • organization of communications and interaction between relevant divisions of the Management Committee: of PJSC LUKOIL Management of PJSC LUKOIL, setting goals to implement changes in management systems; Vagit Alekperov • securing the highest HSE standards, approval of HSE corporate policy, Committee, Vice President, Chief analyzing efficiency of the HSE management system and improving its • organizing and monitoring the process of Sustainability Report preparation; performance; of Staff of PJSC LUKOIL • enhancing the system of collecting, preparing and disclosing reporting • approval of target HSE programs; information; • the functioning of the risk management and internal control system; • preparing recommendations for governing bodies on the matters discussed; • reviewing the report “The State of HSE at LUKOIL Group” • analyzing feedback from stakeholders on sustainable development issues

1 The name of the Task Force was changed pursuant to PJSC LUKOIL Order No. 173 dated 30 September 2019.

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MANAGEMENT AREAS OF SUSTAINABILITY BOARD OF DIRECTORS LEVEL EFFORTS A PARTIAL LIST OF MATTERS related to sustainable During the reporting year, the members development discussed by the Board of Directors of the Board of Directors’ became much in 2019 included: more active in discussing and promoting The Health, Safety and Environmental Committee is responsible for: The Health, Safety the sustainability and climate agenda and Environmental • developing a Health, Safety and Environmental Policy, setting goals at the Company. Relevant matters and assigning tasks, assessing significant risks and opportunities in HSE, were included in the agenda of several (HSE) Committee analyzing environmental issues (including climate-related issues) meetings during the reporting year. of PJSC LUKOIL and the achievement of key performance indicators (KPIs) The number of matters raised and related Implementation of the Strategic Development Program • analyzing and approving any HSE initiatives and assessing tasks doubled year-on-year. of LUKOIL Group during 2018-2027 their effectiveness Chairman: Ravil Maganov, • evaluating compliance of LUKOIL Group’s activities with applicable laws First Executive Vice President and other HSE requirements For more detail, see the section Potential for growth given the transition to a low-carbon of PJSC LUKOIL • preparing proposals on the improvement of LUKOIL Group’s HSE of the Report entitled “Climate economy management system. Change.”

For more detail, see p. 48 Key global trends in the liquid hydrocarbon market in the period through 2035

The Board of Directors also enhanced its engagement with stakeholders on climate change. Specifically, a meeting was held Enhancement of the risk management and internal PJSC LUKOIL Heads of relevant divisions manage the implementation of strategic and targeted with representatives of an investment control system programs that address sustainable development issues, including climate, water fund participating in the Climate Action use, biodiversity and waste. 100+ initiative.

Independent Member of PJSC LUKOIL Anti-corruption measures Board of Directors Toby Gati was actively involved in sustainability and climate change discussions at meetings of the Board of Directors Implementation of the Code of Business Conduct and the Sustainability Task Force and Ethics of PJSC LUKOIL LUKOIL Group entities and provided recommendations, including regarding the improvement of disclosures. Occupational health and safety status and measures to improve the level of work safety Heads of LUKOIL Group Make operational decisions at enterprise level to ensure that industrial safety, The goals and objectives for further environmental protection, and injury rate targets are attained as required. Ensure development of sustainable development entities the achievement of targets approved by the Group’s Corporate Center. activities are set. Significant focus will be placed on the development Engagement with PJSC LUKOIL investors and shareholders of measures in response to climate change.

Another important focus area LUKOIL Group’s Sustainability Report for 2018 will be the enhancement of occupational Heads of dedicated Lead the implementation of strategic and target programs. and environmental safety, as well as the overall improvement business units Implementation of target and functional programs of the sustainability management system and practices, and determination of the contribution to the United Nations’ Sustainable Development Goals.

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Composition and activities of the Board of Directors and its committees in 2019 STRATEGY, INVESTMENT members also considered issues To strengthen the competencies AND SUSTAINABILITY pertaining to the implementation of the Task Force members, a workshop COMMITTEE of ethical standards and analyzed titled “The outlook for legal regulation Strategy, Human feedback from employees on those of sustainability matters in the Russian Board Investment Audit Resources The Strategy, Investment issues. Federation after the ratification Indicators of Directors and Sustainability Committee plays of the Paris Agreement” was held and Sustainability Committee and Compensation of PJSC LUKOIL a key role in advancing LUKOIL Group’s The Committee conducted an analysis to which independent experts Committee Committee sustainability efforts. The number of matters related to the external from KPMG were invited. of matters related to sustainable assessment of the Board of Directors’ 11 4 3 3 development on the Committee’s performance in the reporting year With the active involvement agenda has risen significantly. All and made a decision to consider of the Corporate Secretary, the level Number of members relevant matters put before the Board the feasibility of implementing of informing the Board of Directors of Directors are first considered the external assessment. and management on the most relevant by the Committee. In the reporting issues of sustainable development year, the Committee also considered for stakeholders was increased. the development of investor In particular, meetings1 Types of members Full information on the Board 6/3/2 2/2/0 3/0/0 3/0/0 relationships, implementation committees’ activities is available with a representative of Hermes, of functional programs, and a cost- in the Company’s Annual Report an investment fund participating independent saving program. for 2019 in the Climate Action 100+ initiative, were executive1 organized where the goals of the initiative non-executive directors For more details see p. 108 and investor’s informational expectations AUDIT COMMITTEE were discussed with Task Force Gender composition 2/9 1/3 0/3 0/3 members. An expert on climate Key matters discussed by the Committee reporting with a solid track record women members in the reporting year SUSTAINABILITY with CDP presented current projects men concerned the systematization TASK FORCE to monitor corporate activity in mitigation of anti-corruption measures, external and adaptation to climate change. assessment of a PJSC LUKOIL internal As the volume of reporting information Number of meetings 9/11 7/0 8/0 6/1 audit methodology, as well as further continually grew, sustainability reporting The Company is stepping up its efforts improvement of the risk management standards expanded and became more to raise awareness of stakeholders personal system. An independent assessment complicated and, especially given about LUKOIL Group’s position absentee2 of the internal audit was conducted. the need to enhance relations with all on and contribution to the attainment groups of stakeholders, the functions of the United Nations’ Sustainable The Board of Directors charged of the Task Force were expanded in 2019 Development Goals. A brochure Number of sustainability the Committee with the drafting resulting in its renaming. “Contribution to the Attainment of the UN development matters 20 15 4 5 of an Anticorruption Policy, an internal Sustainable Development Goals” was discussed regulatory document which will In 2019, the Sustainability Task Force published by LUKOIL. systemize the Company’s anticorruption conducted four meetings. Toby Gati, position and outline the anticorruption an independent member of the Board The Company plans to continue its framework, goals and objectives. of Directors, and experts on various efforts to implement a sustainability Attendance rate at personal sustainability areas were present at some management system, including meetings, % of those meetings. Among other things, the adoption of the following documents HUMAN RESOURCES the following issues were examined in 2020: AND COMPENSATION in 2019: • Anticorruption policy COMMITTEE • methodology for identifying material • Program for Development topics of the Sustainability Report of Renewable Energy Sources Information on the structure of PJSC LUKOIL Board of Directors, compliance Matters discussed by the Committee • reporting boundaries • Regulations on the Preparation of the Company’s corporate governance practices with the Bank of Russia’s at its meetings included, among • legal regulation of climate change of a Sustainability Report. Corporate Governance Code, details of the Board members and other others, processes related to personnel matters in Russia information are published in annual reports and on the Company’s website management, improvement • assessment of reporting boundaries LUKOIL will also keep working to ensure in the section “Corporate Governance”: of the compensation and incentive and preparation of a GHG emission Company adaptation to climate change. system for the Company’s senior inventory executives, effectiveness of prevention • the framework for and stages measures ensuring that employees’ of preparation of the Report labor rights and interests are respected, • development of Regulations and the results of a staff morale on the Preparation of a Sustainability and motivation survey conducted Report at LUKOIL Group entities. Committee • feedback from investors.

1 According to the recommendations of the Corporate Governance Code, executive directors are understood not only as members of the Management Committee of PJSC LUKOIL, but also as persons having working relationships with the Company. 2 It is common practice for PJSC LUKOIL to hold absentee meetings. Typically, absentee meetings are called to discuss matters requiring quick approval that cannot be planned beforehand. 1 The meetings took place in January–February 2020.

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HEALTH, SAFETY AND ENVIRONMENTAL (HSE) COMMITTEE OF PJSC LUKOIL SUSTAINABLE DEVELOPMENT AWARDS IN 2019

The Committee is an effective for LUKOIL Group in HSE issues, year, making plans for the future period, mechanism for liaison between as well as regulatory developments and considering initiatives to promote For the second Based PJSC LUKOIL was one of the winners the Company’s management in countries where LUKOIL is present. a culture of safety at the Company. year in a row, on evaluation of the contest for the best socially and functional and linear divisions Those factors are subsequently taken PJSC LUKOIL results, responsible oil and gas companies of 2018. of PJSC LUKOIL and LUKOIL Group into account during the development In 2019, the Committee took several ranks first LUKOIL Group’s Results of the contest were announced entities on industrial, fire and implementation of target programs. decisions to further promote a culture in the ESG rating managed Sustainability at the Ninth International Gas Forum in Saint- and environmental safety, health The second meeting is devoted of safety and leadership culture by the rating agency RAEX. Report for 2018 was Petersburg. The contest is organized by the Ministry and accident prevention. to taking stock of progress of health and to introduce changes to target The rating evaluates the way the prize winner in the RSPP of Energy of the Russian Federation. The Company was and safety programs for the reporting programs for 2020–2023. in which environmental, nomination for “The Best awarded certificates for the development of charitable The Committee was established social and managerial risks Report on Corporate activities, for the best public non-financial report in 2016 to advance the HSE of a company are taken Social Responsibility by an oil and gas company, and also won a certificate management system in LUKOIL Group into account in its strategy and Sustainable with a special badge of the Russian fuel and energy and is led by Ravil Maganov, a member Snapshot of the Health, Safety and Environmental (HSE) and management, which Development” complex for its active social policy. of the Board of Directors, thus Committee of PJSC LUKOIL (2019) indicates the long-term in the Moscow Exchange’s ensuring communication of health, sustainability of the business. 22nd Annual Report safety and environmental matters NUMBER OF MEMBERS Competition in 2018. to the Board of Directors. The Board 11 of Directors is presented annually VICE PRESIDENTS a report on the state of the management COMPOSITION including those who are members 10 of the Board of Directors system in those areas, and the results of activities and initiatives undertaken HEADS OF DEPARTMENTS 1 RISK MANAGEMENT to improve the management quality and speed of decision-making. NUMBER OF MEETINGS 2 The Company’s management Key sustainability risks include: by the Board of Directors of PJSC LUKOIL The Committee holds meetings NUMBER places considerable emphasis • climate change risks and the Audit Committee of the Board twice a year. The first meeting is held OF MATTERS DISCUSSED 7 on risk management issues • health, safety and environmental risks of Directors of PJSC LUKOIL. to consider material risk registers to provide reasonable assurance • risk of shortages of qualified personnel as to the achievement of strategic goals • reputational risks. Sixteen groups of the most significant in the face of uncertainties and negative risks affecting the business activities factors. Certain steps were taken to enhance of LUKOIL Group entities were identified. EMERGENCY AND ACCIDENT WARNING SYSTEM the risk management system The qualitative and quantitative PJSC LUKOIL regularly identifies, in the reporting year. assessment of such risks is carried out The Company has a system The functioning of the system with risks of serious consequences describes, evaluates and monitors • Work continued to improve the practice annually according to risk probability for monitoring, warning, communication is regulated by standards and local (death of employees and significant possible events that could adversely of accounting for risks when making criteria and criteria on the magnitude and reporting on emergency situations regulations developed on the basis damages), the Operational Headquarters affect the Company’s activities, develops key investment decisions. of the consequences. Risk appetite was and accidents covering all levels of legal requirements. was established1 to deal with accidents measures to prevent their occurrence • Draft internal regulatory documents defined for each material risk, and measures of management of LUKOIL Group, at hazardous production facilities or to minimize the negative impact were prepared and forwarded were developed to mitigate or eliminate including the Board of Directors In order to improve of LUKOIL Group entities. in case such events occur. The Company for approval. These were developed their negative impact. The staff of the Risk and the Health, Safety and Environmental the efficiency of PJSC LUKOIL’s constantly works on the identification with the aim of strengthening the risk Management Division and relevant blocks Committee of PJSC LUKOIL. response to potential accidents and assessment of new risks management system at LUKOIL Group monitor the implementation and on updating relevant information entities in accordance with PJSC LUKOIL and effectiveness of the measures. in the corporate information system. Risk Management and Internal CORPORATE SECRETARY Control Policy, as well as improving By reporting the risks identified, LUKOIL Group’s Risk Management the Company’s investment activities we inform stakeholders about certain Corporate Secretary Natalia Vice President for Strategic Development of the agenda and preparation and Internal Control Policy sets and corporate governance. circumstances that may worsen Podolskaya pays significant attention of PJSC LUKOIL, and Toby Gati, of meetings of the Sustainability Task forth unified and mandatory the performance of the Company to sustainable development matters. an independent member of the Board Force, including the invitation of external basic principles and approaches Risks are managed at all the levels: with some certain probability. At the same Taking into account that sustainable of Directors, in active work to improve experts and representatives of various to organizing the risk management at the level of LUKOIL Group entities, time, PJSC LUKOIL is making due efforts development is identified as one the sustainable development system. stakeholders to the meetings. system of the Company, and the key PJSC LUKOIL and at the level of the Board to minimize the risks associated with its of the goals of LUKOIL Group’s strategic objectives of the system, as well as key of Directors. Information on the risk profile own production activities in the regions development, the Corporate Secretary The Corporate Secretary In order to promote stakeholder tasks of the risk management system of LUKOIL Group entities is included of where the Company operates. is committed to supporting the initiatives is actively involved in coordinating engagement, the Corporate Secretary participants at PJSC LUKOIL. in annual reports which are reviewed of the Company and encouraging the preparation of the sustainability deals with incoming requests using all the practical application of expertise reporting of LUKOIL Group available information channels: mail, and exceptional competencies and interacts with the relevant e-mail, and a dedicated internal portal of the Board of Directors members structural divisions of the Company, of the Sustainability Task Force. All in this field. As a result, Natalia as well as with members of the Strategy, requests are processed and discussed Podolskaya facilitated the participation Investment and Sustainability Committee with structural units with the subsequent The text of PJSC LUKOIL Risk of Leonid Fedun, a member of PJSC LUKOIL’s Board of Directors. provision of comprehensive information Management and Internal Control Policy of the Board of Directors of PJSC LUKOIL, Special focus is placed on the formulation on requests and proposals received. is available on PJSC LUKOIL website at:

1 Order No. 48 of PJSC LUKOIL dated 23 March 2015

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A list of key sustainability risks Risk of shortage of qualified personnel

Insufficient skills or qualifications To mitigate this risk, we focus on the comprehensive development DESCRIPTION OF RISK CATEGORY RISK MANAGEMENT AND MITIGATION ACTIVITIES of personnel may have an adverse of our talent pool. LUKOIL’s talent management strategy is aligned with its effect on our financial performance development strategy and the staffing demand of its business segments based on planning and budgeting processes that enable the workforce to be efficiently reallocated through insourcing as well as flexible recruitment, professional training, and developing talent. Climate change risks

For more detail, see the section Strengthened climate change regulations We minimize this risk by: of the Report “Our Staff” could adversely impact operations • recording greenhouse gas emissions and planning initiatives aimed of PJSC LUKOIL as a major fossil fuel at their control; producer and greenhouse gas emitter by driving costs up and performance down. • carrying out constant monitoring of relevant legislative changes Additionally, LUKOIL Group operates and taking steps to obtain information about them at the preliminary discussion stage, as well as ensuring our representatives participate Reputational risks in various regions with hard-to-predict during the preliminary discussions so that the risks and uncertainties potential climate change impacts that may that may arise from new legislative initiatives are clarified PJSC LUKOIL is exposed to various To mitigate this risk, we make efforts to: result in a significant adverse effect. and our views in relation to the proposed changes have been factors that may cause reputational • maintain regular communication with our stakeholders; represented; risks due to both internal and external • taking climate change risk into account when designing factors, including noncompliance • providing unbiased information on financial and operational performance and constructing facilities in environmentally sensitive areas (the Far with statutory requirements, in a timely manner; North, offshore facilities). constituent documents, and internal • ensure continuous monitoring of compliance with statutory requirements regulations, as well as through breach and effective agreements; of contractual obligations, poor • effect timely payments to counterparties. product quality, and a rise in negative For more detail, see the section perceptions of our financial stability The company controls the quality of its products and services. of the Report titled “Climate Change” and position For instance, the Filling Stations Hotline has been set up to promptly address any comments and suggestions regarding filling stations operations. We pay close attention to safety and environmental protection and operate in line with the best HSE standards. We place a great emphasis on social responsibility and working Health, safety and environmental risks conditions, maintaining and improving our effective occupational health and social security framework through targeted programs. The Company’s facilities are exposed To mitigate these risks, we designed and successfully deployed to risks of process disruptions, hazardous the Environmental Protection, Occupational Health and Safety See more in the sections of the Report releases, environmental damage, accidents, Management System certified to ISO 14001 and OHSAS 18001. on “Ethics and Statutory Compliance,” fires, and incidents that may result The following key initiatives are being implemented: “Safety,” “Environment,” “Our Staff” and “Communities.” in unscheduled idle time at these facilities • target corporate HSE programs; • industrial control over the operation of hazardous production facilities; • a process ensuring contractors’ end-to-end compliance with mandatory HSE requirements; • development of leadership and safety culture; • the appointment of qualified staff across various business levels; • development of Plans to Localize and Mitigate the Consequences The risk management system also comprises the following categories which includes risks of Accidents at Hazardous Production Facilities (PLMA) and the Spill and respective mitigation actions: Prevention, Control, and Countermeasure (SPCC) Plans; maintaining strategic, country, competitive risks, macroeconomic, financial, legal and industrial risks, risks of terrorist acts, illegal actions a pool of emergency personnel and resources; and training of third parties, etc. personnel who operate hazardous production facilities as well as the emergency response teams applying PLMA and SPCC Plans.

A full description of the risks and their management measures is disclosed in line with regulatory requirements, as well as in annual reports of PJSC LUKOIL. A detailed description of the risk For more detail, see the sections management system, including the stages, organizational structure and functional map of the Report “Safety” and “Environment” of the participants, is provided in Section “Corporate Governance” of the Annual Report for 2019.

For more details see p. 123

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ETHICS AND STATUTORY COMPLIANCE

ETHICAL STANDARDS been violated. All the reports received Stakeholders can contact the Business LUKOIL Group entities comply • abroad: USD 3.3 billion RUB 127 billion to the budgets are handled by the Commission’s Ethics Commission using any available with the tax legislation in effect • in the Russian Federation: of Russia’s constituent entities, Adherence to ethical standards Secretary. Staff members may provide communication channels, including in the countries in which they operate. RUB 1,122 billion, including and RUB 0.54 billion to local budgets; is at the core of our corporate a report anonymously, which ensures in English: [email protected] (available In 2019, the following taxes1 were paid: RUB 854 billion to the federal budget, RUB 140 billion in excise taxes. 24/7), via delivery of a written report culture. These standards are set forth their protection and the confidentiality to the Commission, or by telephone. in the PJSC LUKOIL Code of Business of the reports. The Company provides The contact information of the Business Conduct and Ethics and cover various communication tools for such cases which Ethics Commission is provided aspects, including: are available around the clock (e-mail, in the Code of Business Conduct and Ethics ANTICORRUPTION MEASURES • respect for human rights (including a confidential hotline). of PJSC LUKOIL. labor rights, the rights of local LUKOIL promotes a zero tolerance procedures and preventing conflicts Regulations of LLC LUKOIL Uzbekistan communities and small indigenous The Company has grievance approach when it comes to corruption. of interest. Operating Company2. Based peoples, and freedom of association procedures in place, enabling staff The Company does not tolerate any on the commitment to high ethical and trade union activity) to provide suggestions on the work payments or other forms of incentives In foreign countries, in addition standards of doing business, the Board • zero tolerance towards and combatting of the mechanism currently in place, provided to representatives of state to corporate-wide regulations, local of Directors decided to develop corruption and fraudulent activities thus helping the Company get a better authorities. regulatory documents can apply, a document establishing common • adherence to fair competition rules understanding of stakeholders’ needs which were adopted either voluntarily principles, goals and objectives • statutory compliance. and issues. The rules of anti-corruption behavior or in accordance with local legislation to combat corruption, and therefore STATUTORY COMPLIANCE are included in the set of internal and govern economic security instructions were given to draft such The principles of the Code of Business In 2019, HR divisions undertook standards for many business processes, and anticorruption issues. For example, a document and submit it to the Board Conduct and Ethics are consistent to familiarize employees The Company respects laws including the ones that regulate ensuring the Company’s operations in Uzbekistan for its approval in 2020. with the provisions of the United Nations of LUKOIL Group entities in Russia of the countries where its facilities corporate security and confidentiality are governed by the Anticorruption and the International Labor Organization and abroad with the Code of Business and offices operate, strives to prevent of information, conducting tender (ILO) conventions ratified by the Russian Conduct and Ethics. This is included any violations of law, and supports Federation, including those related in the list of documents that new staff the principles of free and fair competition to the observance of human rights must read as part of the hiring process. and fair business conduct. and the prevention of corruption. PJSC LUKOIL employees acknowledge HUMAN RIGHTS For more detail, see Appendix 6. in writing that they have read the Code No material claims1 relating to any of Business Conduct and Ethics. violations of anti-trust, product quality The Company reaffirms its commitment a violation of human rights is committed in LUKOIL Group entities, including We promote ethical behaviors among and labor relations laws were initiated to the principles of human rights as a result of the activities of the Company child, forced and slave labor, forced our business partners, suppliers Heightened awareness among against the Company in 2019. One compliance, including freedom of speech, and/or its individual representatives, resettlement of indigenous peoples4. and contractors, informing them employees and practical implementation significant fine amounting to RUB set forth in the Universal Declaration LUKOIL undertakes to take measures We believe that human rights of our rules, and strongly suggest of the provisions of the document led 68.9 million relating to the Company’s of Human Rights and other UN to eliminate the consequences of such are a comprehensive concept that affects them to familiarize themselves to an increase in reports addressed environmental impact was paid in Russia documents, such as UN Guiding Principles violations. all aspects of our activities, including with the PJSC LUKOIL Code of Business to the Business Ethics Commission. (see Section on “Environmental Protection”). on Business and Human Rights, the OECD labor rights, the right to a healthy Conduct and Ethics, where all basic In 2019, seven reports were received. Guidelines for Multinational Enterprises Entering contractual environment, quality products, the rights The Company publishes a Report principles regarding human rights The reports mainly concerned on Budgetary Contributions annually. and the Voluntary Principles on Security relationship with our partners, of indigenous peoples, etc. This Report are stated, before signing any contract. the clarification of procedures This reporting is aimed at increasing and Human Rights (see Appendix 6). we inform them of our high requirements provides information on what LUKOIL for interaction between managers the transparency of the Company’s The Company prohibits any forms for ethical business conduct and respect is doing in these areas. At the same and staff, matters relating to vacation, payments made in the countries of violence and violation of human for human rights, and urge them time, a top priority for the Company This document can be found of operations. Reports are available on the Company’s website at : and handling procedures for reports. All dignity in compliance with the Russian to follow these requirements, defining is the prevention of violations of labor the documented issues were investigated on the corporate website: Constitution. The Company expects its it as a condition for long-term cooperation rights, the preservation of workers’ and necessary measures taken. business partners to respect and apply with our Company. life and health, and the observance the same principles in this area. of the rights of local residents whose In 2019, during an internal audit, We inform our employees and other interests are affected by our facilities. 53 cases of violation of local regulatory The Company respects and strictly stakeholders about our human rights acts, that are obligatory for execution, observes human rights. A manifestation policy. Standards of human were revealed in the organizations of aggression3 in any form is unacceptable rights compliance are enshrined of LUKOIL Group. Entities took measures in the Company. The company considers in the Code of Business Conduct The Business Ethics Commission led to prevent such violations in the future. it unacceptable to obstruct the activities and Ethics of PJSC LUKOIL by the President of PJSC LUKOIL At the same time, there were no of human rights defenders and shows and are mandatory for all LUKOIL Group considers all aspects of ethical behaviors violations of the norms and provisions due respect for human rights activities entities. demonstrated by the Company’s of the Code of Business Conduct carried out within the legal framework. staff. Any staff member may contact and Ethics of PJSC LUKOIL. Identified The Company expects that similar In 2019, there were no received the Business Ethics Commission using any cases of violations are not significant, approaches are applied by its partners. If complaints on human rights disregard available communication means if they that is, do not affect the achievement think that their rights or interests have of the strategic goals of the Company. 1 The amount of taxes comprises income tax and excise taxes. The calculation methodology for the indicator will be reassessed in line with the GRI Standard 207 Tax 2019. 2 Order No. 150 dated 2 April 2018. 3 Aggression means threats, intimidation, legal attacks, physical injuries. 1 See Appendix 7 for the definition of a material claim relating to the breach of law. 4 The hotline has not been contacted concerning any human rights violations (see Ethics section). 34 35 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

HR audits The Company uses the following tools to monitor the compliance of human rights both in Russia and abroad: HR audits involve auditing the processes associated with the documentation of labor The following issues relations, payroll, the compliance with labor were examined: laws, the Company’s regulations, and other requirements covering labor law provisions. social partnership surveys on the moral and psychological HR audits also check the procedure environment in labor groups for documenting disciplinary actions that may be associated with employees’ non- entering into and termination of employment contracts compliance with the Code of Business annual corporate audits of HR interaction with indigenous minorities Conduct and Ethics (e.g. information services to verify compliance of the North (hereinafter – IMN) 1 on the employment of relatives as direct employment of people with disabilities with labor laws and corporate subordinates may be requested). requirements (HR audits) Effective management systems compliance with the Code of Business Conduct and Ethics interaction with local communities where are reviewed, including those ensuring we work non-discrimination. Based on the results of the audit, the Company develops personal data protection recommendations for the enhancement of personnel management processes. In 2019, audits were conducted Social partnership in all countries and regions where agreements covering all full-time in 11 LUKOIL Group entities1. No material conflicts of interest we are present, taking into account staff. The Russian entities that did violations of human and labor rights were LUKOIL’s regular interaction the specifics and characteristics not conclude collective agreements identified. with the International Association of Trade of local culture. are directly covered by the Industry labor pay Union Organizations of PJSC LUKOIL Agreement for Organizations of the Oil (IATUO), the International Labor As part of social partnerships, and Gas Sectors and the Construction Monitoring staff morale Organization (ILO) and IndustriALL the scope of the social commitments of Oil and Gas Facilities of the Russian and motivation the employee’s right to rest Global Union helps to implement best of the Company and trade union Federation. practices in complying with labor rights organizations that are parties The company regularly monitors and serves as a platform for social to agreements is revised and updated In 2019, collective agreements were compliance with human rights, including weekend work and work on holidays, irregular working hours dialogue. We use common principles on a regular basis. Those commitments in effect in 49 Russian and 9 foreign conducting a study of the moral and approaches to working with staff are documented in collective entities. and psychological context in LUKOIL Group entities. In 2019, the results of monitoring compliance with vacation schedules, including for workers the moral and psychological context in jobs with harmful working conditions; other aspects were reported at a meeting of the Human of employment relations. Share of employees covered by collective agreements in LUKOIL Group,% Resources and Remuneration Committee of the Board of Directors of PJSC LUKOIL. The control section showed a good moral and psychological climate and a high level SHARE OF EMPLOYEES COVERED SHARE OF RUSSIAN ENTITIES’ of satisfaction of the Company’s employees BY COLLECTIVE AGREEMENTS EMPLOYEES COVERED BY COLLECTIVE with working conditions. Interaction with indigenous a harmonious balance between IN LUKOIL GROUP ENTITIES AGREEMENTS minorities on land use the economic activities of LUKOIL Group Monitoring of psychological context and activities in the territories entities in the territories of indigenous 2019 2019 is conducted by regular surveys (no more of traditional lifestyles minorities of the North and the latter’s than once every two years at the same interests in preserving their traditional enterprise). The survey diagnoses the level We share the principles enshrined lifestyle and economic activity. of employee satisfaction with various in the UN Declaration on the Rights 88.9 96.4 aspects of labor and identifies the most of Indigenous Peoples, the UN Global 2017 2018 2017 2018 significant and most challenging aspects Compact and the Resolution of the World of work according to employees. Conference on Indigenous Peoples, The survey uses the methodology and are committed to ensuring of the Stockholm School of Economics 88.0 90.1 95.1 97.7 based on the Employee Satisfaction Index (ESI) model, which is widely used in Europe and in Russia.

1 Including: LUKOIL-BULGARIA EOOD (Bulgaria), LUKOIL MID-EAST LIMITED (Egypt), Perm Branch of LLC LUKOIL-Engineering PermNIPIneft, 1 LUKOIL Uzbekistan Operating Company (Uzbekistan), LLC LUKOIL-Volgogradneftepererabotka, LLC LUKOIL-Permnefteorgsintez, LLC LUKOIL-AERO, According to Russian law, minorities are ethnic groups of no more than 50 thousand people. LLC LUKOIL-Uralnefteprodukt, LLC LUKOIL-Nizhnevolzhskneft, LLC LUKOIL-Yugnefteprodukt, LLC LUKOIL-Engineering.

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seeks to avoid involuntary relocation • economic agreements with the heads of people living on the territory of areas of traditional resource use STAKEHOLDER ENGAGEMENT of traditional natural resource use. • agreements on social and economic LUKOIL respects The company applies the Free and Prior development with reindeer farms the rights of indigenous Informed Consent principle and seeks • collaboration with indigenous The successful implementation of our strategic goals WE STRIVE minorities of the North to minimize the consequences for those community organizations is facilitated by a relationship of trust with stakeholders, TO BUILD LONG- affected by such measures. • support for specific projects through provided for by Russian TERM CONSTRUCTIVE laws, including the use grant financing in the framework including state and local authorities, shareholders of resources, the preservation In the reporting year, in the course of the Competition for Social and investors, business partners and customers, workers RELATIONS BASED of the environment, the right of LUKOIL Group’s production activities and Cultural Projects of PJSC LUKOIL. and trade unions, Russian and international ON THE PRINCIPLES to use land and other natural in areas of traditional settlement and/ For more details on Company interaction organizations, and society as a whole. OF PARTNERSHIP, resources. or economic activity of indigenous minorities in the North, no forced with indigenous minorities of the North, see COMPANY resettlement of indigenous peoples PARTICIPATION and no complaints regarding the violation of the indigenous IN IMPLEMENTING Indigenous minorities of the North minorities’ rights by LUKOIL Group LONG-TERM live in four regions of our operations: entities were registered. Compensation DEVELOPMENT GOALS, the Khanty-Mansi Autonomous Area – is annually paid to indigenous people: Yugra1, the Yamal-Nenets Autonomous under license obligations in the territory TRANSPARENCY Area, the Nenets Autonomous of the Khanty-Mansi Autonomous STATE LEGISLATIVE SHAREHOLDERS OF OPERATIONS, Area and the Krasnoyarsk Territory. Area – Yugra (where LUKOIL-Western Engagement with local AND EXECUTIVE AND INVESTORS AND INFORMATION. LUKOIL’s operations are historically Siberia, RITEK and LUKOIL-AIK operate) communities AUTHORITIES associated with the territories inhabited and under agreements with reindeer In order to increase the effectiveness by the Khanty and Mansi, the indigenous farms in the territory of the Nenets With its wide presence in countries We interact with state legislative of relations with shareholders the revised These principles people of Siberia. Thus, the system Autonomous Area (where LUKOIL-Komi having different cultures and socio- and executive authorities of all levels version of the Shareholder Relations are set forth in the Social Code of relations with the indigenous minorities operates). economic patterns, LUKOIL Group uses in Russia and with local authorities Policy of PJSC LUKOIL was established of PJSC LUKOIL and the Code of the North began to take shape a variety of methods for interaction in foreign countries. by the decision of the Board of Directors of Business Conduct and Ethics from the very outset of the Company’s The Company engages representatives with local communities to address of PJSC LUKOIL dated 11 December of PJSC LUKOIL. activity. of indigenous minorities to participate emerging issues. In Russia, representatives 2018 (Minutes No.17). The Policy, in decision-making on projects that of PJSC LUKOIL and LUKOIL Group among other issues, states the principles In Russia, subsoil use, including affect their rights (Articles 27–29 The Company strives to create conditions entities take part on an ongoing basis of equal treatment of all shareholders, the allocation of land plots in traditional of the Declaration on the Rights for unhindered contacts with local in discussing legislative initiatives as well as the commitment to applying settlement areas and/or areas of Indigenous Peoples). In particular, residents when implementing its foreign and in the work of advisory groups best practices of corporate governance. of economic activity of indigenous in order to obtain a preliminary freely exploration and production projects and expert forums, discussing issues The observance of shareholders minorities of the North, is regulated informed consent of the indigenous as an operator. For example, a system that are topical for the Russian oil legitimate rights and mutual by state authorities (under license peoples’ representatives, meetings of collection and response to complaints and gas industry. Management engagement in the benefit of sustainable agreements or other documents that are held at various stages of project and queries was deployed in Uzbekistan. of PJSC LUKOIL and LUKOIL Group and dynamic development entitle companies to use such subsoil implementation: public hearings prior As part of exploration and production entities engages with the authorities of PJSC LUKOIL facilitates creating sites). The terms and conditions to project implementation (in accordance projects where the Company as part of the upgrading of production shareholder value and increasing of the use of licensed areas, including with the legislation of the Russian is a participant, the interaction with local facilities, signing and implementation the reputation of the Company. providing compensation to indigenous Federation), and information events communities is mainly the responsibility of agreements on social and economic communities, are established by federal as projects are implemented. of the operator. LUKOIL informs cooperation, as well as in regional Our investors comprise Russian provide information to representatives and regional authorities. Hence, local communities about its policies and international forums. and foreign entities and individuals of the investment and financial issues related to respect for the rights In general, interaction with indigenous and responsible practices whenever pursuing various investment strategies. communities using various channels, of indigenous peoples, including minorities of the North is carried required. Leveraging legal mechanisms To strengthen investor relations and react promptly to incoming queries. migration issues, are governed by Russian out within the framework of federal guaranteeing stakeholder participation and maintain the investment appeal federal and regional legislation. and regional legislation of the Russian In Russia, a large number of events in the discussion of draft regulations, of the Company, LUKOIL’s equity In recent years, we can observe Federation, licensing obligations are held for residents of regions the Company participates in the creation story is communicated to participants a marked upward trend in the number We fully comply with the conditions of LUKOIL Group entities, as well where human rights can be discussed, of a modern, stable and healthy system in the financial market, including of responsible investors taking set forth in legislation, regularly as federal and regional programs including public hearings, round tables, of state regulation, using internal the disclosure of requested information into account sustainability factors interact with representatives to support indigenous peoples. dialogues, visits to LUKOIL enterprises corporate processes for monitoring, and targeted measures. when making investment decisions. of indigenous communities, and take The following mechanisms are used: (for an example, see the “Komi Republic” evaluation, planning, etc. In this regard, cooperation their opinion into account when planning • cooperation agreements between case study). The practice of engaging In order to attract additional investment with this group of stakeholders has been and implementing exploration PJSC LUKOIL and regional in dialogue2 has begun to be applied LUKOIL liaises with regulatory bodies, in the Company’s equity, a shareholder expanded (including the organization and production projects. The company administrations at the Romanian refinery as well. public associations and non-profit analysis is conducted on an ongoing of meetings with independent members organizations, and monitors regulatory basis, and groups of investors of the Board of Directors), information and legislative activities in the Russian with whom targeted measures disclosure in public materials has been Federation on an ongoing basis. will be carried out are identified. We improved, and work on systemic issues continually strive to raise the level of sustainable development has been of information transparency, regularly enhanced. 1 The region was called the Khanty-Mansi Autonomous Area in 1991. 2 Dialogue (public dialogue) hereinafter in the Report is an in-person event with the participation of the Company and various stakeholders on a wide range of issues related to corporate social responsibility and sustainable development, in connection with LUKOIL activities in a particular region.

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We liaise with international rating agencies The past year marked the hundredth and information database owners; anniversary of the International Labor we also publish climate reporting as part Organization. Being ILO’s only partner Stakeholder engagement in 2019 of the Carbon Disclosure Project (CDP). in Russia, LUKOIL Group took an active part in the organization of the anniversary One of the key elements of interaction events. During the Russian hour SUPPLIERS STAKEHOLDERS EVENTS IN 2019 EVENT-RELATED COOPERATION with the investment community of the 24-hour online video marathon, AND CONTRACTORS is to ensure investor feedback the President of PJSC LUKOIL Vagit for PJSC LUKOIL governing bodies Alekperov extended his congratulations LUKOIL’s supply chain covers STATE LEGISLATIVE and management. In response on the ILO’s anniversary. Also, a meeting entities of various legal forms to incoming queries, the level of Russian President Vladimir Putin and sizes, from large companies AND EXECUTIVE AUTHORITIES of disclosure of information in financial with ILO Director-General G. Ryder and small and medium-sized businesses statements, annual reports, sustainability was held where the contribution to individual and social entrepreneurs. Legislative authorities The Company reviewed more than 700 draft Standard-setting initiatives in the field reports and on the corporate website of LUKOIL Group to ILO activities We are open to cooperation and provide of the Russian regulations and submitted proposals of environmental protection covered is constantly increasing. in the Russian Federation was noted. a level playing field. We perform Federation on 260 of them to the federal authorities. issues of compensatory reforestation, impartial and effective selection Compared to 2018, the share of draft emission credits, sanitary protection of suppliers and contractors through regulations affecting the Company’s activities zones of industrial facilities, tender procedures in key areas and requiring its response rose by 30%. and carbon tax of the Company’s business. Regional authorities 44 events with the participation of LUKOIL 9 cooperation agreements, 10 protocols in the Russian President Vagit Alekperov were held, and 20 supplementary agreements Efforts of LUKOIL Group’s investor Federation resulting in the signing of 41 documents to existing cooperation agreements relations service were highly rated CLIENTS on cooperation by the investment community, Memorandum of cooperation resulting in the Group receiving Our clients comprise large and medium- with the Government of Stavropol Territory an award from the professional sized entities operating in various magazine Institutional Investor sectors of the economy and private SOCIETY Tripartite agreement between the Ministry in 2019. individuals. We provide our clients of Sports of the Russian Federation, with high-quality products and services, We build our relations with society the Government of the Khanty- and develop innovative products based on the principles of openness Mansi Autonomous Area – Yugra tailored to the needs of regional markets and partnership. Social investment and PJSC LUKOIL on the construction and the individual needs of consumers. programs are implemented in constant of social and sports infrastructure Our goal is to reinforce our reputation contact with local authorities, mass in the territory of the Khanty-Mansi as a responsible and reliable producer media, and municipal and public Autonomous Area – Yugra and supplier of energy products. organizations. Significant focus is placed on interaction with the environmental Ministries Business trips of PJSC LUKOIL management Activities of LUKOIL Group entities The Company operates a quality community and residents of the Russian to production facilities in the regions management system covering all of the regions and countries in which Federation, local of operations EMPLOYEES the stages a product passes through we work on questions of environmental authorities, AND TRADE UNIONS when moving from the factory protection and social issues. international International Forum devoted to the Year Issues of cultural identity to the consumer. LUKOIL applies The programs are implemented organizations of Indigenous Languages in Russia (2019) and preservation of national languages Social partnership is at the core a responsible approach to customer with the participation of experts having (Khanty-Mansiysk, Russia) in the regions of the Russian Federation of LUKOIL Group’s relations with employees relations and observes the principles a solid track record implementation and trade unions. The Company has of fair marketing and sales of products. of social projects in various industries. 18th Session of the UN Permanent Forum LUKOIL’s experience in the preservation built a social partnership system based To provide strong support to its We respond to queries from foreign, on Indigenous Issues, Round Table and development of national languages on agreements between employer, customers on any emerging issues, federal and regional media, hold media “Preservation and Promotion of the Linguistic of the indigenous minorities of the North trade unions and employees. Meetings the Company studies customer tours and publish relevant materials. Heritage of Indigenous Minorities of employees and representatives feedback thoroughly to identify the most of the North” (New York, the USA) of the management of PJSC LUKOIL pressing issues and research customer LUKOIL is also a participant, organizer and LUKOIL Group entities are held satisfaction. and sponsor of forums, specialized Extended board meeting of the Federal regularly. conferences, roundtables and other Agency for Ethnic Affairs (Moscow, Russia) events where the Company can For many years, LUKOIL has been interact with other industry players Joint meetings of deputies of the Republic Diversity and preservation of languages collaborating with the International Labor and stakeholder groups noted above of Kalmykia’s Hural and the Duma of the Russian Federation’s ethnicities Organization (ILO) and IndustriALL Global on a wide range of topics. of the Khanty-Mansi Autonomous Area – Union. Yugra (Elista and Khanty-Mansiysk, Russia) Tourism development

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STAKEHOLDERS EVENTS IN 2019 EVENT-RELATED COOPERATION STAKEHOLDERS EVENTS IN 2019 EVENT-RELATED COOPERATION

SHAREHOLDERS AND INVESTORS SOCIETY

Shareholders More than 200 queries from investors and Climate strategy and reporting Local communities Roundtable «Sustainable Development Presentation of LUKOIL Group Sustainability and investors over one thousand of queries from shareholders and municipal of LUKOIL Territories» (Perm, Russia) Report Measures to reduce emissions of greenhouse were handled authorities gases and pollutants State authorities 6 roadshows, 18 major investment conferences, Oil spill management system and mitigation Scientific and technology conference Corporate best practices in industrial safety, over 180 meetings and 50 calls with investors actions (Rostekhnadzor, “Industrial and Occupational Safety at Oil work quality and efficiency improvement were organized Ministry of Emergency and Gas Enterprises” Land remediation Situations), expert Quarterly conference calls regarding disclosure community (RSPP, of the Company’s financial performance Waste management Union of Oil and Gas Human rights Producers of Russia), A trip for representatives of the investment non-governmental community to the Nizhny Novgorod refinery was Engagement with local communities and oil and gas organized in the run-up to MARPOL-2020 organizations Anti-corruption Two General Shareholders Meetings were held Indigenous Meeting «Approval of the Procedure Compensation of damages to the traditional EMPLOYEES AND TRADE UNIONS minorities for Compensation of Damages Caused habitat of indigenous minorities of the North, authorities to Indigenous Minorities of the Russian of the Russian Federation as a result and non-governmental Federation, Their Associations and Persons of the business activity of companies International Labor 24-hour online video marathon dedicated Implementation of the ILO principles Belonging to Indigenous Minorities of the Russian and individuals organizations Organization (ILO) to the 100th anniversary of the ILO in the work of HR companies Federation» (Kogalym, Russia) of indigenous Roundtable as part of the 74th session of the minorities Awards to the winners of the “Talents The experience of PJSC LUKOIL was UN General Assembly ( New York, the USA) of the North in Russia of the Arctic. Children” project (Moscow, Russia) presented in the area of sustainable development, in particular supporting Exhibition dedicated to the anniversary indigenous minorities of the North, Siberia and the Far East of the Russian Federation of the ILO and its operations in Russia (Moscow, Russia)

International Official launch event of the International Year Culture preservation of indigenous SOCIETY organizations of Indigenous Languages (2019) at UNESCO minorities of the North Headquarters (Paris, France) Public authorities, expert and sectoral National Sustainable Development Forum Corporate sustainable development Regional and local Public dialogue opened by the Romanian Launch of the Competition for Social (Moscow, Russia) practices, sustainable development refinery (Ploesti and Bucharest, Romania) and Cultural Projects; the Company’s organizations, authorities, non- programs of LUKOIL Group governmental experience of holding the competition the mass media in Russian regions in Russia organizations in foreign countries Regional Technology Day in the Republic of Udmurtia Encouraging regional industrial enterprises Authorities RusPrix Award 2019 (Noordwijk, Netherlands) Investment cooperation between Russia governments (Izhevsk), Samara Region (Samara), Tyumen to participate in open tenders conducted and non-governmental and the Netherlands, LUKOIL Group’s work and industrial Region (Tyumen), Voronezh Region (Voronezh) by PJSC LUKOIL and LUKOIL Group entities. organizations in the Netherlands enterprises in Russia Exchange of experience and participation in foreign countries in events International Folklore Festival Burgas-2019 Cooperation between Burgas and Kogalym (Burgas, Bulgaria) Industrial Ecology-2019 conference Industrial ecology, the prospects (Moscow, Russia) for implementation of green economic Media Press releases, press conferences LUKOIL Group strategy and production models plans, developments in oil and gas industry regulations, social responsibility Non-governmental Meetings with representatives of the Pechora Environmental conditions in the Komi and environmental Rescue Committee, WWF Russia, etc. Republic organizations Scientific community Support for environmental and biodiversity Scientific approaches to biodiversity Implementation of the project to rescue projects and research in Russian regions conservation the saiga antelope

42 43 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

During the assessment, the following 2018 2019 SUPPLY CHAIN indicators are taken into account: the occurrence of accidents and fatal accidents; the number of breakdowns Total number of potential tender participants that submitted bids LUKOIL Group entities procure a significant amount of goods, works and incidents over the past three in tenders for the procurement of goods, works, and services and services and interact with a large number of contracting companies years; confirmations that trainings have (Russian entities of LUKOIL Group) annually. At the same time, LUKOIL is also a supplier of goods to consumers been completed; knowledge testing. based all around the world. Potential tender participants also provide social information, in particular 4 ,241 3,330 related to observing the working hours of their employees. TENDERS ANTI-CORRUPTION INDUSTRIAL SAFETY REQUIREMENTS AND OCCUPATIONAL That information is included Including for tenders prescribing an HSE assessment The selection of suppliers of goods, SAFETY REQUIREMENTS in a candidate’s questionnaire works and services in Russia is performed Under the Regulations, potential evaluating their compliance in accordance with the Regulations tender participants who, directly If the subject of the tender requires with the HSE requirements. NUMBER on Holding Tenders to Select Suppliers or indirectly, offer, have given, or agree the need to verify the state Based on the questionnaire, 1,720 1,465 and Contractors of LUKOIL Group Entities to give compensation in any form of the HSE system of a potential tender experts of the Company perform (hereinafter, the Regulations) and is based to an employee of PJSC LUKOIL participant, experts from PJSC LUKOIL the assessment of the HSE level PERCENTAGE OF THE TOTAL NUMBER OF POTENTIAL TENDER PARTICIPANTS on the principles ensuring competitive, or LUKOIL Group entities cannot be and LUKOIL Group entities perform of the candidates. In the event of poor 40.6 44.0 unbiased and effective supplier selection. admitted to tenders. a comprehensive assessment score in the assessment, the candidates THAT SUBMITTED BIDS Foreign entities of LUKOIL Group modify based on a corporate document1. are not admitted to tender. the enterprise-wide documents to make If any such facts are identified, potential The assessment procedure includes2: them compliant with local laws. tender participants can be classified • checking for compliance For certain types of procurement, as bad-faith suppliers of goods, with the international standards technical audits of potential tender In order to minimize risks, when choosing works, and services. The decision OHSAS 18001 and ISO 14001, participants and mandatory assessments Number of potential tender participants admitted to tenders based counterparties the Company is guided to classify a potential tender participant Russian laws and internal regulations of potential tender participants’ on the assessment results by the following criteria: in this category and disqualify of PJSC LUKOIL; employee compliance with corporate • criteria for evaluating the technical it from a tender is made by the Tender • ascertaining whether potential tender requirements of work at the facilities part of the tender offer include Committee or the Procurement participants possess necessary licenses, of LUKOIL Group entities are carried out. 1,579 NUMBER 1,352 determining the reliability Committee of PJSC LUKOIL. adequately qualified staff, personal and experience of the bidder, protective equipment, and technical PERCENTAGE OF THE TOTAL as well as checking the conformity capability and technology. 91.8 NUMBER OF POTENTIAL TENDER 92.3 of the goods with technical PARTICIPANTS CHECKED requirements; • criteria for evaluating the commercial part of the tender offer include determining the competitiveness Note. The information for 2018 is provided taking into account the application of a unified of the tender offer. approach to selecting reporting data for 2018 and 2019, as well as the update of the corporate BASED ON THE RESULTS OF 2019, THE SHARE database of applicants participating in tenders of PJSC LUKOIL and LUKOIL Group entities in 2019. As part of the development of green IN 2019 procurement practices, we collaborate OF RUSSIAN SUPPLIERS OF CENTRALIZED MATERIAL Interaction during • immediately notifying the customer with a foreign company, which AND TECHNICAL RESOURCES STOOD AT the implementation of contracts of all accidents that have taken place is the world’s leading producer of energy 92.3% during the performance of works efficient pumping equipment. OF TENDER Under the terms and conditions • prohibition on the unauthorized of contracts to supply goods/works/ accumulation and placement 94% PARTICIPANTS services, all suppliers and contractors of waste, the discharge of wastewater IN TERMS OF THE NUMBER OF SUPPLIERS FOR WHOM HSE undertake to adhere to the requirements (liquid waste) and chemicals, AND ROSE SLIGHTLY TO ASSESSMENTS WERE of current laws, as well as those the discharge of pollutants into of LUKOIL Group’s Health, Safety the air, or the contamination of soil PRESCRIBED PASSED and Environment Policy in the 21st with chemicals while performing works 94.8% THE COMPREHENSIVE Century. The following requirements at LUKOIL Group entity’s facilities. ASSESSMENT are an integral part of the contracts: IN TERMS OF THE TOTAL VALUE OF PURCHASES • undergoing introductory / initial IN RUSSIA YEAR-ON-YEAR. PROCEDURE workplace briefings before contractors SUCCESSFULLY. begin the performance of works / provide services at LUKOIL Group The number of tender participants entity’s facilities, the availability who successfully passed of personal protective equipment the HSE assessment procedure in accordance with the nature rose year-on-year, indicating of the work being performed, 1 Pursuant to the “Procedure for Assessing the Health, Safety, and Environment Level of Business Entities Intending to Participate in a Tender.” 2 an improvement in the quality confirming that suppliers / contractors The assessment of the candidates for contractors is performed in accordance with an internal regulatory document: Appendix 32 to the Regulations on Holding Tenders to Select Suppliers and Contractors of LUKOIL Group Entities approved by a Resolution of OJSC LUKOIL Management of bids received. have appropriate first-aid skills Committee dated 30 September 2013 (Minutes No. 19 as amended).

44 45 WWW.LUKOIL.COM

CLIMATE CHANGE 48 CLIMATE CHANGE AS OUR COMMON CHALLENGE 53 APPROACHES TO MANAGING CLIMATE CHANGE ISSUES

Q ARE LUKOIL’S ACTIVITIES Q WHAT IS LUKOIL’S ALIGNED WITH THE CURRENT CAPABILITY IN TERMS CLIMATE AGENDA OF ADAPTING TO THE LOW- 56 CARBON MODEL? GOALS AND INDICATORS

A When it comes to the carbon intensity of the Exploration A We are reducing carbon dioxide emissions and are seeing Leonid Fedun and Production business segment, LUKOIL has already a very positive trend vis-à-vis reducing methane emissions, 58 established itself as a leading company in this area driven mainly by associated petroleum gas utilization Vice President in the oil and gas sector. To maintain this leading position, and the implementation of the environmental program. ENERGY for Strategic we are prepared to take further steps to reduce greenhouse gas CONSERVATION We have experience in implementing projects that emissions, and we have a clear vision on how to achieve this. Development are comparable to the practices of leading oil and gas of PJSC LUKOIL We are planning to set long-term goals to reduce greenhouse companies, for example, in the area of renewable energy. Such gas emissions, based on external changes and stakeholder projects are being implemented at the refineryin Volgograd, requests. The Company also intends to perform an assessment where a solar power plant has been built. In the future, 64 of the impacts of climate change on its production facilities we plan to roll out this experience across the Group. We also RENEWABLE and infrastructure, especially in the Arctic and the permafrost see new lines of business that can be developed, including ENERGY SOURCES zone. technologies for absorbing and disposing of carbon dioxide and the construction of pumped-storage facilities, with priority The priority is to make changes to the corporate governance given to projects with the greatest commercial potential. system, based on best global practices. LUKOIL already takes into account the climate factor when managing risks. We In our opinion, an important component of low-carbon are also taking steps to provide more complete disclosures development is a system of compensatory measures, such 66 on greenhouse gas emissions in our public reporting. as reforestation and forest management projects. REDUCTION At the same time, there are a number of factors that may affect OF EMISSIONS the future of the oil industry. Thus an ability to adapt to external changes, combined with a flexible strategic approach, are imperative in modern business. WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

KEY CHANGES AND RESULTS IN THE REPORTING YEAR CONTEXT: CLIMATE CHANGE AS OUR COMMON CHALLENGE

The climate change issue has nature with a wide coverage development to be able to make a sizable MEASURES AIMED AS PER THE COMPANY’S dominated the social agenda for many and requires that efficient solutions be contribution to solving the climate change AT REDUCING THE CLIMATIC ESTIMATES, ELECTRIC POWER years now, and in 2019 very close found to challenging tasks carrying problem while ensuring our economic IMPACTS FROM OPERATIONS GENERATION FROM RENEWABLE attention was paid to the problem. long-term consequences. growth. We see not only risks resulting OF THE COMPANY WERE SOURCES HELPS PREVENT ABOUT Climate change and environmental from global warming but also new threats led the list in global risks Given the global nature of LUKOIL Group’s business opportunities arising CONSIDERED AT THE MEETINGS for our planet1. The climate change business, we are analyzing potential for LUKOIL Group. OF THE BOARD OF DIRECTORS, THOUSAND TONNES problem is of an obviously complex trajectories of the global climate agenda’s THE STRATEGY, INVESTMENT 500

AND SUSTAINABILITY COMMITTEE OF СО2E PER YEAR OF GHG AND THE SUSTAINABILITY TASK EMISSIONS. Rising public activity FORCE. Despite efforts of the international people’s lives and our planet’s health3. An of climatic effects and offers prospects community and growing investment unprecedented burst of social activity4 of increased pressure on governments in a low-carbon economy2, extreme that ultimately transformed itself into and GHG emitters. THE TASK OF DEVELOPING SHARE OF ELECTRIC weather events and ever more evident a Global Climate Strike Campaign testifies LONG-TERM GHG EMISSIONS POWER GENERATION climate changes continue to affect to an increased social comprehension REDUCTION TARGETS WAS FROM RENEWABLE SOURCES SET. IN 2017–2019 AVERAGED The need to act immediately

6% Estimates5 show that nationally determined peak values have been reached. Both Following the UN Climate Summit OF TOTAL COMMERCIAL contributions will not be sufficient to reach the academic and expert communities (COP 25), 121 countries set more GENERATION. the Paris Agreement’s primary temperature demand that governments and countries ambitions national goals to reduce GHG goal of limiting warming to well below 2°C take additional urgent climate protection emissions, and this may have an impact pre-industrial levels. measures and set more ambitious goals. on the Company’s operations in those Not only measures to reduce emissions countries.

Having achieved 55.3 Gt of СО2E are required but also technologies in 2018, GHG emissions continue providing for a higher GHG absorption IN 2019, METHANE EMISSIONS EFFICIENT APG USE OF to grow and there are no indications that capacity. WERE REDUCED BY 97.6% 45.6% WAS ACHIEVED BY LUKOIL GROUP AGAINST THE 2016 LEVEL ENTITIES. IN RUSSIAN ENTITIES.

AN AVERAGE ANNUAL IN 2019, DIRECT GHG REDUCTION IN ENERGY EMISSIONS BY RUSSIAN CONSUMPTION FOR 2017–2019 ENTITIES WERE REDUCED BY AMOUNTED TO APPROXIMATELY 3.3% 5 MILLION GIGAJOULES (GJ). AGAINST THE 2016 LEVEL (SCOPE 1). 1. Source: Global Risk Report, 2019. 2. Sources (examples): Scaling Up Action: Aiming for Net Zero Emissions; Oil and Gas Climate Initiative, 2019; Top Sustainable Business Trends of 2020; Joel Makower, Sustainable Brands, 2019. 3. Sources: Emissions Gap Report 2019. UN Environmental Program, 2019. The Sustainable Development Goals Report 2019. UN, 2019; Carbon Tracker Initiative: https://www.carbontracker.org/. Special Report on the Ocean and Cryosphere in a Changing Climate. Intergovernmental Panel on Climate Change (IPCC), 2019 and other IPCC 2019 publications; NASA data: https://climate.nasa.gov/blog/2942/2020-vision-looking-back-to-drive-forward/. 2018 Report on Climate Patterns in the Russian Federation. Federal Service for Hydrometeorology and Environmental Monitoring, 2019. 4. Sources: BBC, CNN, The Times, The Guardian, etc. 5. Sources: Emissions Gap Report 2019. UN Environmental Program, 2019; Report of the Secretary General on the 2019 Climate Action Summit and the Way Forward in 2020. UN, 2019.

48 49 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

Role of the oil and gas sector Market mechanisms

Slow rates of structural changes growth rate is required to be 3% per track, and this period may be used One of the major uncertainties analyzed, including the introduction in the transport, power and utilities, year to reach the Paris Agreement’s to fundamentally transform the oil of the climate agenda is what global of a cross-border import tax4. However, agriculture, and manufacturing sectors goals. A more rational use of resources and gas sector. mechanism will be created to govern experts anticipate difficulties in assuring that directly depend on oil and gas opens promising opportunities for both the sharing of emission reduction that the new rules comply with WTO 5 Of the 40 countries where supply, as well as an extensive use governments and companies. A progressive development of digital obligations. principles and free trade agreements . 9 of energy resources1, contribute systems and technologies may a carbon tax or GHG to the acuteness of the climate issue. Being the most affordable energy become a source of new opportunities Although no consensus on setting In addition, “a fundamental reshaping emission allowances have resources at the moment for the majority for the oil and gas sector, including up a global market for allowances of finance” is predicted to occur “sooner been introduced in one After 2015, the rate of energy intensity of countries, oil and gas are still in high in terms of reducing climate on GHG emissions1 was reached than most anticipate”6. Investors form or another, LUKOIL reduction in national economies slowed demand. Until new technologies come and environmental impacts. An essential at COP25, measures for state regulation are requiring that companies promptly is present in the EU (the EU down2: in 2018, only a 1% improvement to the required maturity, ‘old’ and ‘new’ transformation of the sector may ensure of climate change are being enhanced respond to environmental changes, Emissions Trading Scheme was seen, while the energy efficiency power industry will develop on a parallel its climate neutrality in the long term. at the national level2. Projections by price as the gap creates investment has been launched across trajectories suggest their growth within and economic threats7. In these the EU, introduced taxes various ranges3. circumstances the climate agenda in Finland and Norway) will become a determining factor and Mexico (excise tax The requirements of the EU climate of upcoming changes, and 2050 will for import and export policy are expected to become even most likely be a crucial year for GHG of oil products; the amount Moderate optimism more stringent. In December 2019, emitters8. of the tax or allowance as the European Commission has is dependent on the volume Still, there has been progress after approved the European Green Deal, A package of “Sustainable Finance” of GHG emissions). Also the signing of the Paris Agreement3. Relatively new renewable energy sources (solar, wind) which aims for carbon neutrality by 2050. laws is now being passed in the EU. plans to introduce the ETS This shows that efficient solutions may are becoming increasingly competitive even when no government These laws are expected to significantly in Kazakhstan are in place. 4 be found and the situation may change aid is provided , and the numbers of new jobs in this sector The EU member states have announced influence the finance sector as they will Introducing the ETS or carbon for the better. LUKOIL expresses its sometimes exceed those in the traditional power industry. the most ambitious plans to achieve establish the criteria for environmentally tax is also being considered support for the Paris Agreement’s net zero pollution by 2050. A reduction and socially responsible economic in Turkey. goals and is now assessing its abilities prospect in carbon emissions activity. This will have a particular impact to intensify efforts to achieve them. Oil and gas companies, financial organizations and funds by 50–55% as early as by 2030 (instead on investments in the fuel and energy are implementing large-scale carbon dioxide absorption projects of the current goal of 40%) is also being complex. as part of the Oil and Gas Climate Initiative. discussed. Measures required to achieve the stated goals are currently being

However, successful efforts of individual countries, companies and projects cannot succeed alone5. The risk that collective actions prove to be insufficient increases the likelihood of a worse case scenario. To close the gap, significant investment is required, because a lot of new technologies are still at the early development stage and have not been adequately piloted yet. Therefore, it is highly likely that participation in joint projects6 will continue, thus opening 1. Sources: https://www.carbonbrief.org/cop25-key-outcomes-agreed-at-the- new cost efficiency opportunities un-climate-talks-in-madrid; https://www.climatechangenews.com/2019/12/16/ for the participating companies. cop25-achieved-next/ 2. Source: State and Trends of Carbon Pricing 2019. World Bank, 2019. 3. Sources: State and Trends of Carbon Pricing 2019. World Bank, 2019; Fiscal Monitor: How to Mitigate Climate Change. International Monetary Fund, 2019. 4. Border carbon adjustment. 5. Sources: Center for European Reform https://www.cer.eu/insights/should-eu- tax-imported-co2; The World Economic Forum: https://www.weforum.org/ agenda/2019/05/the-case-for-climate-tariffs/ 6. Source: Larry Fink, Chairman and Chief Executive Officer of BlackRock, a major asset manager, in his annual letter to portfolio managers. https://www.blackrock. com/corporate/investor-relations/larry-fink-ceo-letter 7. Source: RSF Social Finance CEO Jasper van Brakel: https:// sustainablebrands.com/read/defining-the-next-economy/ 1. Source: https://yearbook.enerdata.ru/co2-fuel-combustion/CO2-emissions-data-from-fuel-combustion.html we-need-a-business-revolution-and-we-can-t-base-it-on-the-kindness-of-ceos 8. 2. Source: https://www.iea.org/reports/energy-efficiency-2018 Source: UN-convened Net-Zero Asset Owner Alliance. 9. 3. Source: Emissions Gap Report 2019. UN Environmental Program, 2019. A ”carbon tax” is a fee imposed on the burning of carbon-based fuels (coal, oil, gas). 4. Source: Global Trends in Renewable Energy Investment 2019. UN Environmental Program, Bloomberg NEF, 2019. 5. Source: Resilience to Climate Change? A new Index Shows Why Developing Countries will be Most Effected by 2050. The Economist Intelligent Unit, 2019. 6. For example, Three Percent Club: https://sdg.iisd.org/news/global-coalition-commits-to-3-annual-global-increase-in-energy-efficiency/ 50 51 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

Russia APPROACHES TO MANAGING CLIMATE

In 2019, Russia acceded to the Paris measures and plans for the fuel CHANGE ISSUES Agreement, becoming one of the parties and energy complex and the Arctic Zone establishing the global climate of the Russian Federation will be developed agenda and officially acknowledging at the national level. LUKOIL is already taking During 2019, a notable progress was achieved in managing climate change issues the significance of collective efforts decisions on the transformation at LUKOIL, a decision was made to integrate climate issues into LUKOIL Group’s to tackle climate change challenges. The 2019 debates of the draft Federal Law of the system used “On the State Regulation of Greenhouse to manage the climate issue, Strategic Development Program. Russia is among the world’s five largest Gas Emissions and on Amendments and is actively involved emitters of greenhouse gases, along to Certain Legislative Acts of the Russian in identifying new ideas with China, the United States, the EU Federation” demonstrated that the legal and opportunities, and India1. At the same time, Russia framework in furtherance of restricting with national plans, GHG MANAGEMENT SYSTEM has substantial potential to mitigate emissions and implementing economic emission policy, and global best practices taken into a negative impact on the climate mechanisms may be established only by enhancing its energy efficiency, over a longer time frame. In March 2020, account. taking measures to promote reduction the Ministry of Economic Development CHANGES DURING 2019 KEY MID-TERM TASKS

of CO2 emissions and forest restoration, of the Russian Federation elaborated and taking steps in other areas2. a draft of Russia’s long-term low-carbon development strategy up to 20503, The Board of Directors considered Plans: A National Action Plan for the First which presents the baseline scenario the issue of LUKOIL Group’s Climate • further enhancement Stage of Adaptation to Climate Change of low-carbon development. Three other Strategy. of the climate change for the Period up to 2022 was scenarios – an intense scenario, an inertial GOVERNANCE Expert discussion of the climate change management system approved by the Government scenario and a scenario of development topic as part of the Sustainability Task of the Russian Federation. Among without state support – are also Force in consultation with Toby Gati, other steps to be taken, strategic considered. a member of the Board of Directors

Implemented: Plans: STRATEGY • scenario analysis of the influence • to develop long-term goals of climatic factors on the Company’s to reduce GHG emissions, business to 2030; with account taken of the Paris • analysis of the strategies of oil Agreement and gas companies • to evaluate GHG reduction potential. The work will be supervised by Vagit Alekperov, President of PJSC LUKOIL.

The Company has the Risk Plans: RISKS Management System in place, which • to implement the procedure also anticipates management for assessing climate change of climate-related risks influence on production facilities and infrastructure

Data related to GHG emissions Plans: is provided in the Sustainability Report, • to perform an extensive GHG INDICATORS the Annual Report, The Data Book emissions inventory and the CDP • to determine the reporting climate boundaries pursuant to the GHG Protocol1

1. The GHG Protocol (Greenhouse Gas Protocol, https://ghgprotocol.org/) is an international standard applied to account and manage GHG emissions 1. Sources: Carbon Tracker Initiative, The Moscow Times (https://www.themoscowtimes.com/2019/09/30/the-cost-of-carbon-in-russia-a67496). from private and public sector operations, value chains and mitigation actions. The standard is a joint project of the World Resources Institute (WRI) 2. Sources: СО2 absorption by the forests in Russia in the context of the Paris Agreement, WWF Russia, 2018; http://duma.gov.ru/news/45976/ and the World Business Council for Sustainable Development (WBCSD). 3. Source: https://economy.gov.ru/material/file/babacbb75d32d90e28d3298582d13a75/proekt_strategii.pdf

52 53 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

MANAGEMENT: ROLE OF THE BOARD OF DIRECTORS

In 2019, outstanding work was The Board of Directors set medium- APG utilization performed to shape the Company’s term tasks, implementation of which will position on climate change issues. Two guarantee that the Company makes a solid Efficient APG use of 97.6% was achieved by LUKOIL Group entities in 2019. meetings of the Board of Directors contribution to the achievement of the UN Further work in this area will involve the implementation of projects as part were held (16 October 2019 SDG 13 and the Paris Agreement’s goals. Further GHG emissions of the World Bank and UN initiative “Zero Routine Flaring by 2030.” and 13 January 2020) to address these The tasks set includes the following reduction goals issues. The key GHG emission points, among others: are to be set and a related factors driving emission dynamics, • determination of the projected action plan is to be developed. as well as opportunities to reduce GHG emissions reduction level, It is our aspiration to actively GHG emissions in the long-term were along with the scope and content participate in public debate discussed. of compensatory measures; over climate change issues and to interact with key • assessment of the impact of the climate Reducing GHG emissions at oil refineries In December 2019, three development change on production facilities stakeholders both in Russia scenarios for the global energy system and essential infrastructure, especially and abroad. At our oil refineries projects to reduce carbon dioxide emissions into and the Russian oil and gas industry in vulnerable territories (the Arctic, the atmosphere either are or will soon be under way. for the period up to 2035 and 2100 permafrost), preparation of a list see the following case study on page 58 in terms of climate change issues were of facilities and territories falling within presented1. At the meeting of the Board the scope of the assessment; of Directors held in January, Leonid • incorporation of internal mechanisms Fedun, Vice President for Strategic designed to mitigate harmful Development of PJSC LUKOIL, impacts on the climate, stress testing presented a report on climate scenarios of investment projects in terms Greater energy efficiency and global trends in the climate agenda. of external regulating measures applicable to GHG emissions. Owing to the use of secondary energy resources and the development of our own cogeneration facilities, the Company’s production needs are satisfied with no increase in direct GHG emissions, with reduced volumes of purchased energy resources and reduced indirect GHG emissions. The average annual reduction in energy consumption for 2017–2019 amounted to approximately 5 million GJ. Potential for further reduction in energy consumption

AREAS FOR ACTION CO2 capture, is based on the implementation of investment projects at oil refineries focused Enhancing efforts utilization on construction, equipment retrofitting and upgrading, as well as improving LUKOIL Group’s Climate Strategy will to improve energy and storage the efficiency of power generation facilities. build upon its current experience efficiency technologies (CCUS and EOR) in delivering low-carbon projects comparable with similar projects LOW-CARBON/ ENERGY- implemented by the leading oil and gas EFFICIENT Renewable energy sector companies. PRODUCTS The installed generating capacity of renewable energy sources rose to 395 MW. APG Our ambition for the future is to satisfy ENERGY The share of ‘green’ energy generated in 2017–2019 averaged 6% of total commercial UTILIZATION – our customers’ demand for energy CONSERVATION generation. According to Company estimates, power generation from renewable EMISSIONS resources, while significantly reducing PROGRAM sources helps prevent around 500 thousand tonnes of СО E per year of GHG REDUCTION 2 GHG emissions and preserving financial emissions. We are planning to proceed with RES projects both in Russia and abroad. stability. “NEW” RES (SOLAR, WIND)

Current projects to reduce Utilization New areas climate impacts of APG “Green hydrogen” and natural gas In addition to the areas noted above, we are seeking to utilize the most suitable CO leaks 2 capture and storage technologies (CCS and EOR), find solutions designed to reduce

natural gas and CO2 emissions, and implement compensatory measures. Low-carbon project areas Forestation under consideration and reforestation

1. “Major Trends in the Global Liquid Hydrocarbon Market to 2035” report: http://www.lukoil.ru/Business/Futuremarkettrends.

54 55 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

GOALS AND INDICATORS 2016 Indicators 2017 2018 2019 (baseline)

LUKOIL demonstrates a sustained LUKOIL Group entities that have Solomon Associated LLC according 2. Geography upward trend in reducing GHG a material impact through GHG to the methodology applied2). emissions and intends to continue active emissions are included in the reporting: Russia 31.29 31.14 29.99 30.26 work to step up efforts in this area. 29 Russian1 and four foreign entities In Russia, the main contribution EU countries 6.73 6.47 6.08 6.63 (three oil refineries in Italy, Romania (around 80%) to the total direct In 2019, the Company surpassed and Bulgaria, and one operating emissions is made by fixed fuel Central Asia NA 0.24 0.37 0.33 its direct GHG emissions reduction company in Uzbekistan). combustion sources. Flaring made Share of emissions accounted for by countries 18 17 17 18 target for Russian entities by two up about 10% of the total emissions where the regulation of GHG emissions has been percentage points – GHG emissions In 2019, the data collection scope and was at the same level as emissions implemented (Romania, Bulgaria, Italy), % were reduced by 3.3% against the 2016 was defined more precisely. Unlike from production processes. level. An upward trend in reducing in previous years, emissions of natural 3. GHG composition (Russian entities) GHG emissions was achieved even gas used for LUKOIL-Komi’s in-house By virtue of projects on efficient APG

with the growth in hydrocarbon needs were taken into account use, methane emissions reduced almost Carbon dioxide, million tonnes of CО2E 29.85 29.87 29.02 29.48 production and refining volumes in the reporting year, which had twofold (45.6% against the 2016 level). Methane, million tonnes of CО2E 1.44 1.27 0.97 0.78 at Russian entities observed since 2016 a significant influence on the dynamics Almost the entire volume (more than Share of methane, % 4.8 4.2 3.2 2.6 (+1% and +6%, respectively). In the 2019 of gross and specific indicators 90%) of methane emissions comes reporting year, the Company committed for exploration and production entities from oil and gas production processes Other GHGs 0 0 0 0 to determining future GHG emissions in Russia. Emission calculations (in the process of APG extraction, reduction targets, with progress to be for foreign entities included additional during preventive maintenance work 4. Specific GHG emissions reported by the Company on a regular emission points of a power complex on equipment and in cases of equipment basis. within a Romanian oil refinery (which failures). 4.1. Specific GHG emissions in Russia became part of the refinery in 2019) Exploration and production, tonnes of СО E / tonne 2 0.108 0.088 0.079 0.099 In 2019, direct GHG emissions amounted and a catalytic cracking and reforming of oil equivalent in produced hydrocarbons to 37.2 million tonnes of СО E, of which unit at a Bulgarian oil refinery 2 Processing, tonnes of CО E / tonne of processed raw 2 0.173 0.209 0.204 0.183 Russian entities accounted for 81%, (included as recommended by HSB materials and foreign entities for 19%. Petrochemicals, tonnes of CО E / tonne of processed 2 0.352 0.370 0.322 0.301 raw materials

1 2016 Electrical energy sector (tonnes of СО2E / MWh Indicators 2017 2018 2019 0.339 0.332 0.326 0.335 (baseline) of generated electrical and heat energy) 4.2 Specific GHG emissions abroad 1. Direct gross GHG emissions (Scope 1), million tonnes of СО E 2 Exploration and production, tonnes of СО E / tonne 2 NA 0.025 0.024 0.020 of oil equivalent in produced hydrocarbons LUKOIL Group, including 38.02 37.85 36.44 37.22 Processing, tonnes of CО E / tonne of processed raw 1.1. Russian entities 31.29 31.14 29.99 30.26 2 NA 0.339 0.319 0.333 materials By types of activity: 5. Specific methane emissions in Russia, tonnes Exploration and production 10.83 8.85 8.07 10.07 of СО2E/tonne of oil equivalent in produced 0.015 0.013 0.009 0.008 Oil processing and petrochemicals 8.27 10.13 10.05 8.88 hydrocarbons 6. Total energy consumption (purchased Electrical energy sector, including 12.07 11.80 11.66 11.11 NA 497.5 489.3 487.5 and internally generated), million GJ • LLC LUKOIL-ENERGOSETI3 1.09 1.49 1.42 1.29 7. Flaring emissions, million tonnes of СО E 4.64 3.54 2.21 2.52 Transportation and sales 0.09 0.09 0.09 0.09 2 1.2. Foreign entities 6.73 6.71 6.45 6.96 Notes. (1) GHG emissions by LUKOIL Group’s Russian entities were calculated in accordance with the calculation methodology prescribed By types of activity: by the Ministry of Natural Resources of the Russian Federation2. Emissions by LUKOIL Group’s foreign entities were calculated in accordance with the national methodologies of the countries of operation. The indicator “Volume of direct GHG emissions” was checked as a part of the audit Exploration and production NA 0.24 0.37 0.33 of the present Report (auditor – JSC KPMG). (2) The value presented in the “Share of emissions accounted for by countries where the regulation Oil processing and petrochemicals 6.73 6.47 6.08 6.63 of greenhouse emissions has been implemented” line item is calculated as the ratio of GHG emissions released by European oil refineries (PETROTEL-LUKOIL S.A., LUKOIL Neftochim Burgas AD, ISAB S.r.l.) to the total GHG emissions released by LUKOIL Group. Information on LUKOIL Uzbekistan Operating Company LLC is not taken into account when calculating the above value, as no regulation of GHG emissions has been implemented in Uzbekistan at a national level. (3) Fluctuations in specific indicators for oil refining and petrochemical entities are due to changes in the production volumes of end products. (4) The figuresfor direct greenhouse gas emissions for 2016 are presented without taking into account data for LUKOIL Uzbekistan Operating Company LLC; for the period 2017-2019 boundaries are unified.

1. The reporting boundaries include five power generation entities and one equipment operating company (LLC LUKOIL-ENERGOSETI), seven oil and gas producing entities, four oil refineries, one gas processing plant, two petrochemical plants, four oil product supply entities and one air bunkering entity, as well as four transportation entities. 1. The indicator excludes LLC LUKOIL-ENERGOSETI (due to the specifics of the activity and the inability to bring the specific indicator to a single denominator) and LLC 2. HSB Solomon Associated LLC (Solomon, https://www.solomononline.com/). 3. LUKOIL-Ekoenergo (due to the «zero» volume of direct greenhouse gas emissions). LLC LUKOIL-ENERGOSETI is a specialized service company that carries out activities not only in the transmission of electric energy, but also 2. Order No. 300 of the Ministry of Natural Resources of the Russian Federation dated 30 June 2015 (registered with the Ministry of Justice of the Russian Federation in the operation and repair of electric power equipment; maintenance of facilities for the production and transport of thermal energy, water supply as No. 40098 on 15 December 2015) “On Approving Methodological Instructions and Guidelines for the Quantitative Determination of the Volume of Greenhouse Gas and sanitation. Emissions by Organizations Engaged in Business and Other Activities in the Russian Federation.”

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EUROPEAN OIL REFINERIES REDUCING GHG EMISSIONS MANAGEMENT SYSTEM

ELEMENTS LUKOIL has three oil refining plants in Europe (in Italy, Bulgaria and Romania), one joint venture with Total OF THE MANAGEMENT SYSTEM DESCRIPTION CORPORATE DOCUMENTS in the Netherlands (Zeeland Refinery), and a number of medium-sized plants engaged in the lube oil refining and blending business. In line with the EU policy of reducing emission allowances for manufacturing plants, LUKOIL performs comprehensive assessments, including in terms of CO emission levels, when designing high-profile investment 2 The strategic goals and key LUKOIL Group’s Technical Policy projects. activities to improve the energy on Energy Efficiency was approved GOALS efficiency in each business by the Management Committee A project on the replacement Potential “green hydrogen” production Taking into account preemptive segment were determined of OJSC LUKOIL on 26 March 2012 of afterburners at a sulfur recovery unit at a Bulgarian oil refinery and CO2 CO2 emissions reduction plans was launched at an Italian oil refinery, capture prospects at a Romanian oil and appreciation of emission

and a project aimed at improving refinery are now being analyzed. allowances, technological CO2 energy efficiency of the IGCC unit capture and utilization, “green is also under consideration. Both In the Netherlands, even stronger plans hydrogen” production and low-grade The composition Seven corporate STO 1.20 projects will facilitate CO emissions have been set at the national level: heat utilization solutions are being 2 PRIORITIES/ of process-related indicators, fuel standards reduction. A methanol production developed. The estimated contribution consumption rates, etc., were STANDARDS project is under consideration, • to reduce by 2030 CO2 emissions from this program to СО2 emissions formalized the realization of which will facilitate by 49% of the total GHG emissions reduction by 2030 is expected the reduction of GHG emissions (of the 1990 level); to reach 600 thousand tonnes

by about 600 thousand tonnes • to reduce CO2 emissions of СО2E. This know-how may also be

of CO2-E, according to preliminary in the industry by 35% (of the 2016 used and replicated at other entities Specific electric energy The KPI regulations were estimates. level). of the Company in the EU. consumption per tonne of fluid approved by the Management produced (in the Exploration Committee of PJSC LUKOIL and Production segment). on 16 September 2019 The Solomon Energy Intensity KEY PERFORMANCE Index (EII). INDICATORS Energy intensity per tonne of basic raw material for entities in Petrochemicals business-sector Delivery of the approved energy ENERGY CONSERVATION conservation program1

KEY CHANGES AND RESULTS IN THE REPORTING YEAR CERTIFICATION The Russian entities As of 31 December 2019, 25 OF THE MANAGEMENT of LUKOIL Group implemented entities possessed compliance SYSTEM the ISO 50001:2011 compliant certificates covering 68% of the total energy management system LUKOIL Group headcount

Energy Conservation Program STO LUKOIL 1.20.2-2017 “Energy of LUKOIL Group Entities Conservation. Energy Conservation for 2019−2021 in Russia2. and Energy Efficiency Improvement ENERGY CONSUMPTION PILOT PROJECTS THE ENERGY INTENSITY TARGETED PROGRAMS, Energy audits performance by LLC Program for LUKOIL Group FOR PRODUCTION FOR THE CONSTRUCTION INDEX (EII) REDUCED BY LUKOIL-Nizhegorodniinefteproekt Entities. General Requirements PURPOSES IS REDUCED OF DIGITAL SUBSTATIONS PROJECTS of the entities in the Exploration to Development and Execution” ON AVERAGE BY 1% PER ARE BEING IMPLEMENTED AND INITIATIVES and Production, and Refining, (introduced by Order Marketing and Distribution of PJSC LUKOIL of 20 November YEAR FOR THE PERIOD 3.5 AS COMPARED TO 20141 segments 2017 No. 184) 2017-2019

FURTHER The examination of investment projects covers the evaluation of energy efficiency of business plans and related activities. The findings are considered INFORMATION in the general assessment of the project’s economic performance

1. 1. Since 2014, the list of organizations covered by the study has changed; the boundaries of the study, starting in 2014, did not change. The KPI relates to the Exploration and Production in Russia, Oil Product Supply in Russia, Transportation in Russia and Power business sectors, as well as to the following entities belonging to the Refining, Marketing and Distribution business segment: LLC LUKOIL-Trans, transshipment facilities and LLC LUKOIL-AERO. 2. The energy conservation program covers a 3-year period and is revised and approved by management of PJSC LUKOIL on an annual basis. The program for 2019–2021 was approved on 31 May 2018. During the previous reporting period, the program for 2018–2020 was in effect. 58 59 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

OUR GOALS MANAGEMENT SYSTEM CHANGES

Taking account of external environment System – Requirements with Guidance executives in improving energy changes and the introduction of many for Use,” five corporate standards were efficiency and energy conservation. new technical solutions, in 2019 it was amended1. The schedule of certifying resolved to update the Technical Policy. LUKOIL Group entities according Further energy cost optimization The new version is expected to be to this standard was approved. plans include implementation WE VIEW ENERGY EFFICIENCY IMPROVEMENT AS ONE OF THE KEY FACTORS IMPACTING completed in 2020. of projects aimed at increasing THE ENERGY INTENSITY OF PRODUCTS AND LUKOIL’S ABILITY TO ADAPT TO GLOBAL The Set of KPIs was supplemented the cost effectiveness and reliability CLIMATE CHANGE. RATIONAL USE OF ENERGY RESOURCES ENABLES THE REDUCTION As part of preparing with a new indicator – “Delivery of production facilities of LUKOIL Group for the re-certification of energy of the Approved Energy Conservation entities. Significant new energy facilities OF GHG EMISSIONS. ENERGY EFFICIENCY IMPROVEMENT PLANS WILL BECOME management systems of LUKOIL Group Program,” with reporting to be are expected to be put into operation AN INTEGRAL PART OF THE CLIMATE CHANGE STRATEGY AND WILL BE PRESENTED entities for compliance with a new submitted starting in 2020. This indicator at fields in the Komi Republic; and two IN THE STRATEGIC DEVELOPMENT PROGRAM. version of the international standard heightens the interest of senior digital substations are being built ISO 50000:2018 “Energy Management in the Perm Territory.

ENERGY CONSUMPTION STRUCTURE

Oil and gas production companies The oil refining complex ISAB in Italy of 30 MW. The power boiler is made account for the biggest share of energy operates an energy park composed using the circulating fluidized bed consumption for production purposes of two blocks of combined cycle plants. technology that is the most advanced across LUKOIL Group entities. In addition to natural gas, the energy technology for solid fuel-fired boilers. Heat is primarily consumed by oil park makes use of synthesys gas Oil coke as a by-product of deep oil WE SEE THE POTENTIAL for further and gas producers, oil and gas refineries as fuel. Synthesys gas is produced refining is used as a fuel. The power OUR GOALS energy efficiency improvement through and petrochemical plants. Fuels by gasification facilities from asphalt produced is primarily consumed for oil the implementation of the following measures: are basically consumed by oil refineries, generated as a by-product from deep oil refinery process needs. petrochemical plants and power refining. Electricity produced is mainly providers. supplied to external consumers.

securing the efficiency continuous improvement and performance Russian heat and power entities The oil refinery in Romania operates of operating procedures optimization of the energy efficiency of LUKOIL supply electricity and heat an energy park composed of a power and the functioning of process management system to local communities and industrial boiler with the capacity of 185 MW equipment across LUKOIL Group enterprises in the south of Russia. and a turbogenerator with the capacity

integration of innovative energy-efficient securing the effective use technologies and equipment across LUKOIL Group TARGETED PROGRAM of fuel and energy resources entities across LUKOIL Group (electricity Russian entities run the Energy In 2019, program performance In 2019, 3,885 units and heat, as well as boiler Conservation Program of LUKOIL Group is achieved primarily by the following of PMSMs were integrated. and furnace fuels) use of the demand management entities aimed at improving the energy activities: This initiative is implemented mechanism of LUKOIL Group entities, efficiency of power and fuel and at loss in order to enhance the energy which implies re-distribution of electricity reduction. The program covers activities • For entities involved in production, efficiency of the operation consumption relative to peak demand and allows carried out in entities of each the key energy conservation of the mechanized well stock effective development for the elimination of additional electricity output business sector. A dedicated group activities include the replacement and as part of the strategy and upgrade of energy assets of projects of the highest energy of asynchronous motors with magnet of replacing asynchronous of LUKOIL Group efficiency potential is highlighted. Such motors (PMSM), making use motors with PMSMs across projects are included in roadmaps. of electric submersible pumps securing the maximum return oil and gas production For example, 76 highly effective projects as drives. Pumps of the system which on LUKOIL Group entities’ investments in the long companies of LUKOIL Group. are scheduled in 2020–2022 focused maintain the formation pressure term through management of energy supply, As estimated by the Company, only on refineries. are also being upgraded. conservation and efficiency management the delivery of this strategy will reduce electricity costs of the mechanized well stock.

1. STO LUKOIL 1.20.1–2019 “Energy Conservation. Energy Resources Accounting System. General Provisions and Requirements for Equipping Production Facilities of LUKOIL Group Entities”; STO LUKOIL 1.20.3–2019 “Energy Conservation. Energy Audits of LUKOIL Group Entities. Methodology”; STO LUKOIL 1.20.4–2019 “Energy Conservation. Energy Efficiency. Constitution of Indicators for Entities, Processes, Structures and Production Facilities”; STO LUKOIL 1.20.5–2019 “Energy Conservation. Rates of Fuel Consumption, Heat and Power for Typical Processes and Production Facilities of LUKOIL Group Entities” and STO LUKOIL 1.20.6–2019 “Energy Conservation. Energy Management System of LUKOIL Group Entities. General Provisions and Regulated Facilities.”

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• Refineries carried out 132 activities A good example generation – at the Astrakhanskaya CHPP. of power – notwithstanding an increased The Solomon EII1 is used to evaluate EII benchmarks for the sectoral intended to improve energy is the project of decommissioning Implementing this project will allow extraction of hard-to-recover reserves the level of energy efficiency development program for 2018–2027 consumption and retrofitting. inefficient boiler stations reduction in the volumes of burning non- (HTR reserves) in the West Siberia of refineries. Solomon produces global were in effect. • Power plants replace and upgrade and shifting heat loads to the source renewable types of fuel by 7 million cubic and high-viscosity crude oil in the Komi surveys of refineries fuel and lube profile their process equipment in order of combined heat and electricity meters of natural gas per year. Republic (which requires more heat), every two years (in even-numbered In physical terms, the power saved to increase the efficiency factor as well as a rise in water cut of wells years), with the most recent one held is a significant resource for improving and shift heat loads from inefficient in traditional production regions of West in 2019 for 2018. In uneven-numbered production performance. boiler stations which will Siberia (which increases electricity years, LUKOIL performs its internal subsequently be closed. consumption required to lift raw monitoring of key indices (including materials). In 2019, the specific electricity as part of setting and checking Dynamics of Solomon EII consumption indicator of Russian oil compliance with the efficiency factor); as compared to 2014, % and gas production companies was however, Solomon experts do not verify 20.5 kWh per tonne of fluid produced, such results. The Report shows indicator RESULTS which is lower than the 2017–2018 dynamics only based on verified survey indicator (20.6 kWh per tonne of fluid data. 2016 Over the last three years, energy The reporting boundaries cover In general, the dynamics of power produced). 2014 consumption for production purposes entities of all business segments consumption for production purposes EII is used for long-term planning was reduced thanks to the completion in Russia and abroad that involve are accounted for by several factors. At Russian and foreign refineries, and as the efficiency factor of energy conservation activities. energy consumption for production For oil and gas production entities, energy efficiency activities result for the medium term (three-year plans purposes. The oil refinery in Netherlands the construction of our own generating in a considerable improvement of power for the development of corporate is excluded from these boundaries. facilities allows for reducing purchases consumption indicators: EII decreased sectoral development programs). This Power savings resulting by 3.5 percentage points against indicator is also monitored on a quarterly from the implementation the 2014 level. basis. At the time of this Report, of the Energy Conservation Energy consumption for production purposes of LUKOIL Group entities from non-renewable sources Program of LUKOIL Group and procurement, million GJ entities in Russia, million GJ Specific power consumption at the refinery, GJ / tonne of manufactured products 2017 2018 2019 Total for 2017–2019 Total energy consumption for production purposes, including: 497.5 489.3 487.5 2017 2018 2019 • purchased electric power for production purposes 64.1 61.9 58.7 Total for LUKOIL Group, including: 3.6 3.7 3.5 • purchased heat power for production purposes 35.7 19.9 17.4 • Russian entities 3.7 3.7 3.4

• boiler and furnace fuels consumption for production purposes 520.1 537.9 529.6 • Foreign entities 3.3 3.5 3.5 Electricity power sales and supply, including: Heat Notes. (1) Data for Russian plants is displayed subject to the volume of oil products supplied Boiler and furnace fuel • electricity 75.1 73.9 66.7 from other Group refineries in Russia for further processing. (2) Data is displayed subject to gas processing products (LLC LUKOIL-Permnefteorgsintez) and petrochemical products • heat 47.3 56.5 51.5 (LUKOIL Neftochim Burgas AD and ISAB S.r.l.). (3) Data on mini-refineriesis not included in the calculation of indicators on specific energy consumption at refineries.

Note. (1) Power consumption for production purposes by LUKOIL Group entities = Electricity and heat purchased for production purposes + Consumption of boiler and furnace fuel – Quantity of electricity and heat supplied to third-party consumers, as well as residential electricity/ heat consumption. (2) The 2017–2018 data regarding power consumption for production purposes is different from the Sustainability Report for 2018 due to changes to the reporting boundaries, in particular, the addition of the Power Generation business sector to the reporting DIGITAL PROJECTS boundaries. Moreover, after publishing the 2018 Report, values of fuel and energy resources consumption for production purposes of LLC LUKOIL-Nizhnevolzhskneft for 2018 were amended. (3) The method to calculate indicators was improved: all inputs and estimates were The application of digital technologies and improved forecasting. Expected In 2020, LUKOIL Group expects to put converted into GJ. In this regard, the 2017–2019 data was re-calculated. When converting data, the following factors under GOST R 51750-2001 were used: 1 thousand kWh = 3.6 GJ, 1 Gcal = 4.19 GJ, 1 tonne of oil equivalent = 29.3 GJ). in the power sector opens up prospects effects include improved reliability into operation its first digital Chashkino of an extension in equipment life, and safety of the power infrastructure, substation with a rated transformer as well as better use of fuel and energy reduced injury rates and decreased capacity of 32 MVA to service oil Renewable energy (supporting generation) resources thanks to flexible management power grid losses. production facilities. consumption for production purposes, million kWh

Note. (1) The 2018 data refers to LUKOIL Neftochim Burgas AD; the 2019 data – to LUKOIL Neftochim Burgas AD and PETROTEL-LUKOIL S.A. (starting from April 2019). (2) An increased 2018 consumption of power in 2019 was driven by the reorganization resulting in the transfer of the 9 MW solar power plant from S.C. LUKOIL ENERGY & GAS ROMANIA S.R.L. to PETROTEL-LUKOIL Fuel type S.A. Starting from Q2 2019, this solar power plant supplies electricity for the operational needs Solar power of the refineries.

1. The EII index is calculated pursuant to the HSB Solomon Associated LLC methodology with the use of its own factors.

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RENEWABLE ENERGY SOURCES Total volume and share of electric power generated from renewable sources across LUKOIL Group

2017 2018 2019 KEY CHANGES AND RESULTS IN THE REPORTING YEAR Total electric power generation from renewable sources (commercial 1,053 1,365 1,110 and supporting generation), million kWh, including:

• in Russia 812 1,161 880 THE SHARE OF ELECTRIC POWER THE COMPANY DECIDED GENERATED FROM RENEWABLE TO CONSTRUCT A SECOND SPP • abroad 241 204 230 SOURCES (RES) AMOUNTED AT THE VOLGOGRAD REFINERY. Total commercial electric power generation from renewable sources, 1,053 1,365 1,100 TO 6% OF TOTAL COMMERCIAL million kWh, including: GENERATION. • wind power 228 192 218 • solar power 12 17 14 • hydroelectric power 813 1,156 868 Total electric power produced by commercial generating facilities 20,189 19,919 18,307 of LUKOIL Group, million kWh The Company’s objective in the field Territory) was completed. The 48 MW project is the construction of Volgograd Share of commercial electric power generation from renewable sources in total of renewable energy is to increase plant uses a derivative scheme based SPP-2 with the capacity of 20 MW. 5.2 6.9 6.0 the competitiveness of LUKOIL Group on the difference in elevation The construction of the facility electric power produced by commercial generating facilities of LUKOIL Group, % through the achievement of sustainable between the Belaya and Pshish is expected to receive state support development goals, of which rivers. As part of the project, two for generation by renewable sources Note. Dynamics of electric power generation from RES indicators is conditioned upon changes to environmental conditions (water content of rivers, implementation of renewable energy hydroelectric units were fully replaced, (RES CSA). number of sunny/windy days, and other factors.), as well as upon HPP shutdowns for repair/reconstruction. projects for the production of green and the rated capacity of each was energy is an integral part. increased from 16 to 24 MW. As a result, We expect to perform FEED activities the service life of the hydropower plant for the construction of a wind power The key renewable energy tasks include: was extended by 40 years, and its plant with the capacity of 50 MW reliability and environmental safety in the vicinity of the Tsimlyanskaya Share of income • implementation of commercial were enhanced. The efficiency of using HPP (Rostov region), including from sales of electric power RES projects, including the water energy was increased due wind monitoring, selection of sites from renewable sources, % with the involvement of government to the use of cutting-edge technologies. and capacity supply options. Another In 2013–2015, the state system for incentivizing the construction support1; In addition, comprehensive measures proposed investment pattern of RES power plants was formalized and put into operation • reduction/prevention of GHG to upgrade almost all auxiliary systems is the upgrade and efficiency in Russia. Pursuant to Federal Law No. 35-FZ on the Electric emissions; and were taken. After the reconstruction, improvement of hydroelectric 2018 Power Sector, the key instrument to support RES projects • synergy from the construction of RES the net supply of environmentally assets. Options of advancing 2017 in the Russian Federation is the conclusion of long-term facilities at existing oil and gas friendly electric power at the plant will the hydroelectric cluster in the vicinity Note. The “share of income” indicator was 15-year electricity and capacity supply agreements providing production plants and refineries. increase by almost 80% and constitute of the Krasnopolyanskaya HPP determined by the correlation between for preferential rates. The base rate of return for investors was about 260 million kWh per year, which are being examined, including income gained from sales of electric power established (12% for the reporting year). Projects based on wind and solar plants will prevent emissions of at least projects to reconstruct a small HPP from renewable sources and the total income are implemented to supply “clean” 130 thousand tonnes of СО E per year. on the Beshenka river (up to 2MW) from sales of electric power produced The rules for supporting RES projects at energy retail 2 by commercial generating facilities electricity to external consumers. and build the Krasnopolyanskaya HPP-2 and wholesale markets vary. The wholesale market support of LUKOIL Group. A small portion of energy is used We intend to continue implementing (up to 24 MW). system is the key driver for enhancing the renewable energy by LUKOIL Group entities to generate “green” power projects. In the reporting sector in Russia. Projects of wind and solar power plants heat based on solar collectors year, the Company was developing In order to develop renewable Investments in RES with the capacity of over 5 MW, as well as small hydroelectric and to produce electric power based prospective plans of implementing RES energy in Russia and provide advancement, RUB million plants of up to 25 MW are selected on an annual basis. The key on photoelectric modules. projects to be reflected in the Strategic the industry with qualified personnel, selection criterion is the minimum amount of full CAPEX. Program of LUKOIL Group, as well with the assistance of LUKOIL, the basic After the selection, a capacity supply agreement is concluded In 2019, a significant investment as projects for the construction of SPP department “Renewable Energy with the investor. The generating RES facility shall supply all 2018 project for the reconstruction at the sites of the Volgograd Refinery Sources” was created at the Gubkin , electricity produced to the wholesale electricity and capacity of the Belorechenskaya HPP (Krasnodar and Saratov plant. The top-priority Russian State University of Oil and Gas. 2017 market of Russia at market prices. LUKOIL is a participant in this program. Note. The investment details refer to LLC LUKOIL-Ekoenergo and LLC LUKOIL- Volgogradenergo. Increased investments in 2018 were driven by attributing the costs of acquiring a solar power plant for the Volgograd Refinery to the reporting year and by the rise in expenses on the reconstruction of the Belorechenskaya HPP.

1. Capacity supply agreement for qualified generating facilities based on renewable energy sources (RES CSA).

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REDUCTION OF EMISSIONS

At this stage, the key contribution and processing infrastructure, as well was held to source the contractor, 2017−2019. The indicator boundaries in the Kumkol project in Kazakhstan). to the reduction of GHG emissions as upon the distance to target markets. and the agreement for supplying cover Russian exploration In Egypt and Iraq, the entire volume is through the implementation In general, deep APG processing equipment (three compressor units) was and production entities and foreign of APG produced is contractually owned of projects for the efficient use of APG is considered to be most cost-effective concluded. entities LUKARCO B.V. (in proportion by the host countries. at oil and gas producers in Russia. for sufficient production volumes. to the share in the Tengiz project IN 2019, THE LEVEL In general, the APG flaring volume in Kazakhstan) and LUKOIL Overseas In 2019, nine projects for the construction OF THE APG USEFUL has almost halved over the period Kumkol B.V. (in proportion to the share and reconstruction of facilities for efficient LIFE ACROSS APG use were completed in the Perm Territory, the Komi Republic, the Khanty- LUKOIL GROUP WAS Mansi Autonomous Area – Yugra 2017 2018 2019 and in the North Caspian. The summary OUR GOAL Total volume of APG (hydrocarbon) flaring across LUKOIL Group, million 574.867 328.377 309.534 effect from APG flaring reduction 97.6% IS TO FURTHER cubic meters, including: activities made up 27.2 million cubic SINCE 2016, INCREASE THE APG meters. THIS INDICATOR • Russian entities 555.327 312.925 298.933 USE BY REDUCING LUKOIL was the first Russian oil company HAS GROWN • Foreign entities 19.540 15.452 10.601 FLARING to join the World Bank’s initiative for zero BY 5.5 PERCENTAGE Level of APG use across LUKOIL Group, %, including: 95.4 97.4 97.6 EMISSIONS. routine APG flaring by 2030 (announced POINTS, WHICH in 2015), which combines the efforts • Russian entities 95.2 97.3 97.5 of governments, oil companies and public IS A CONSIDERABLE • Foreign entities 97.6 98.1 98.9 organization to increase APG useful ACHIEVEMENT life. The initiative covers two projects FOR THE COMPANY. in the Perm Territory and the Khanty- Mansi Autonomous Area – Yugra entailing In order to reduce APG flaring, Russian expected reduction of GHG emissions Financing of APG use activities, RUB billion

entities have been implementing of about 105 thousand tonnes of СO2E a program to expand efficient use by 2022. since 20031, covering the activities 2017 2018 2019 for the construction of new facilities The Perm Territory • 35 kW air line connecting Total across Russian LUKOIL Group entities 15.0 8.4 10.4 and the reconstruction of older facilities is implementing an investment the 110/35/6 kW Chashkino for APG preparation, transportation project for the construction substation with the 35/6 kW and processing. of a system to collect and transport Zhilinskaya substation; and APG from the Zhilinskoye, Belskoye • 35/6 kW Zhilinskaya substation. Note. The indicator covers the expenses on the construction and reconstruction of APG preparation, transportation and processing facilities, as well APG is used for injection into and Rostovitskoye fields. In 2019, as heat and electric power generation facilities in Russia. The change of the indicator is accounted for the completion of the plan of key activities formations to maintain formation construction and installation work was During the preparation of this Report, under the effective APG use program. For examples of such activities, see the 2019 Annual Report, page 80. pressure and to generate heat performed at the following facilities: startup operations were underway and electricity for consumption by oil at those facilities. The commissioning and gas producers, as well as delivered • Zhilinskoye–Chashkino gas of all facilities under this project REDUCED GAS LEAKS DURING REPAIRS to gas refineries and supplied to gas compressor station (GCS) gas is scheduled for 2020. As a result, distribution systems of other entities. pipeline, a receiving separator the conditions for the efficient APG use We strive to minimize natural gas policies and procedures of the oil at gas transportation pipelines and gas at the Chashkino GCS; of up to 47 million cubic meters per leaks into the atmosphere caused and gas sector, as well as by corporate collection and compression facilities The construction and reconstruction • Chashkinskaya gas turbine year will be created, and oil production by scheduled repairs and equipment standards1. (compressor stations) are scheduled. of facilities allow increasing the APG use electric power station (GTEPS) facilities of OGPW-12 will be provided failures at oil and gas producers. The audit and diagnostics of equipment as a raw material for power with the capacity of 16 MW (4х4 MW), with their own electricity. Production facilities make use are conducted on a regular basis. and petrochemical plants a 6 kW distribution substation, a block In its efforts to identify such gas of mobile and standalone gas and as a product supplied to external gas preparation unit and a booster The Khanty-Mansi Autonomous Area leaks, Russian LUKOIL Group entities leak controls. In the follow-up consumers. The selection pump station; – Yugra continued implementing are governed by regulations, federal of the audit and diagnostics, repair works of economically viable APG use options • 6 kW cable line to connect the 16 MW the project for the reconstruction depends upon the conditions of specific EGTS to the 110/35/6 kW Chashkino of the Povkhovskaya compressor fields, the composition of raw materials, substation and electricity supply station with an annual capacity availability of the gas transportation to the grid; of 600 million cubic meters: the tender

1. FZ-116 on the Industrial Safety of Hazardous Production Facilities, FZ-22 on Making Amendments to the Federal Law on the Industrial Safety 1. The program covers a 3-year period and is revised and approved by management of PJSC LUKOIL on an annual basis. The program for 2019–2021 of Hazardous Production Facilities, STO LUKOIL 1.19.1-2012, Federal Policies and Procedures on the Rules for the Safe Operation of In-Field was approved in 2018. During the previous reporting period, the program for 2018–2019 was in effect. Pipelines.

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SAFETY 71 INTEGRATED HSE MANAGEMENT SYSTEM 78 OCCUPATIONAL SAFETY

Q WHAT STEPS DOES THE COMPANY TAKE Q HOW IS THE COMPANY DEALING TO IMPROVE ITS SAFETY CULTURE? WITH INFORMATION SECURITY CHALLENGES? 87 PIPELINE RELIABILITY AND EMERGENCY PREPAREDNESS A Ensuring safe working conditions and reducing A The year 2019 was dedicated to setting up Ravil Maganov injuries are the Company’s key priorities. Alexander the Information Security (IS) Management Center, LUKOIL is implementing best practices in workplace in order to safeguard the security level of information First Executive safety, with the use of state-of-the-art technology. Podolsky assets. We combined the processing of related events Vice President The Company’s management places a great focus Head of the Information and responses to threats in a Corporate monitoring 92 of PJSC LUKOIL on these matters, with PJSC LUKOIL’s representatives Technology Department center. THE KOMI taking part in Safety Days and visits of the leaders. REPUBLIC We implement measures to mitigate sanction and other Direct engagement between management of PJSC LUKOIL risks related to natural and man-made disasters, failures and employees helps improve motivation levels in engineering and telecommunications networks, and raises the effectiveness of scheduled activities. and disruptions to external supply chains. The level We have begun to make active use of new types of automation of security operations is improving. of equipment, such as the Mobile Inspector software 96 and hardware system, and conduct video surveillance The Single information space (SIP) – a complex SAFETY of basic IT-services providing secure user operations of hazardous facilities. The Safety Culture 4.0 mobile app OF THE ARCTIC has been developed by the Company’s specialists. in the corporate calculating network and protected ZONE, NORTHERN access to corporate information resources – We engage closely with our contractors’ representatives TERRITORIES is developing. and workers on these matters, and invite them AND OFFSHORE to participate in our safety culture events and to share SIP will enable a corporate user from any point FACILITIES best practices. Respective incentives have been also of the globe to access the relocatable Digital introduced. We hope that these measures will help workplace at any time. Lukoil Technology Services to further bolster the culture of safety at the Company’s GMBh launched pilot project on its implementation entities. in 2019. This allowed a prompt switch to remote working conditions taking into account IS requirements 99 during the pandemic. INFORMATION SECURITY WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

KEY CHANGES AND RESULTS IN THE REPORTING YEAR INTEGRATED HSE MANAGEMENT SYSTEM

THE LOST TIME ACCIDENT OVER THE PAST FIVE YEARS, According to its corporate policy, LUKOIL The Integrated System of Management System provides for the identification FREQUENCY RATE (LTAFR) A SUSTAINED TREND TOWARDS is guided by principles aimed at creating of Industrial, Fire, Radiation Safety, and management of risks REMAINED LOW. safe working conditions, protecting Emergency Prevention and Liquidation, and environmental issues, and a risk- REDUCTION IN ON-THE-JOB the health of its employees and people the Protection of Civilians, Occupational oriented approach is applied to system INJURY RATES HAS BEEN in the regions where LUKOIL Group Safety and Environmental Protection planning, introduction of changes SEEN AT BOTH LUKOIL GROUP is present, as well as ensuring the efficient (hereinafter, the Integrated HSE and implementation of cutting-edge ENTITIES AND CONTRACTOR use of natural resources drawing Management System) has been in effect technologies. ORGANIZATIONS. on the best available technologies in LUKOIL Group for over 20 years. NEW DIGITAL SAFETY CULTURE to preserve the environment. The Integrated HSE Management TOOLS WERE IMPLEMENTED.

CONTEXT: OCCUPATIONAL AND INDUSTRIAL SAFETY

Occupational safety makes an important contribution processes removes workers from hazardous workplaces to achieving Sustainable Development Goal 8 (promote and reduces the likelihood of occupational illnesses. Still, inclusive and sustainable economic growth, employment injury risk may rise due to the specific features of human-AI and decent work for all), specifically, to fulfilling Target 8.8 interaction and human contact with the equipment used (to protect labor rights and promote a safe and secure by robots. The risk of marked growth in cognitive overload working environment for all workers). is set to increase and can have significant effects on workers’ psychological and social health. According to ILO1, over the last 100 years notable progress • Automation is unlikely to replace most occupations entirely has been made globally in developing approaches to promote but instead will change the type and number of human safe and secure working environments. The number tasks. Mobile (wearable) smart devices to improve workplace of occupational accidents has declined and working factors (to help monitor air quality and levels of workers environments improved owing to an ongoing identification fatigue, etc.) are increasingly used. However, those using and mitigation of work-related hazards. such smart devices on a regular basis may lose the ability to autonomously make the right decisions on their own. Nevertheless, the challenge of creating safe and secure • In the long run, climate change will be a major driver working environments for all remains important. According transforming the world of work. It is estimated that to an ILO Report2, of 18 exposures measured between 1990 a projected increase in global temperature of 1.5°C and 2016 only occupational exposure to asbestos had fallen by the end of the twenty-first century, will cause total work while all other exposures increased by almost 7%. At the same time to decrease by 2 per cent by 2030 because it will be time, the world of work is undergoing profound changes too hot to work. This will represent a loss of 72 million as a result of new technologies, changing demographics, full-time jobs. and climate change, all of which create new challenges, as well as opportunities. The Report stresses the need for active participation by governments, employers and workers, and all other • The emergence of Artificial Intelligence (robotics), mobile stakeholders to seize the opportunities to create a safe devices and an opportunity to remotely manage production and healthy future of work for all.

1 Sources: Safety and health at the heart of the future of work, ILO, 2019. 2 Ibid.

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INTEGRATED HSE MANAGEMENT SYSTEM

ELEMENTS CORPORATE ELEMENTS CORPORATE OF THE MANAGEMENT SYSTEM DESCRIPTION DOCUMENTS OF THE MANAGEMENT SYSTEM DESCRIPTION DOCUMENTS

The corporate policy establishes LUKOIL Group Policy for Health, The Integrated HSE As at 31 December 2019, GOALS strategic goals, principles Safety, and Environmental Protection CERTIFICATION Management System has certificates issued to 44 and obligations underlying in the 21st Century; approved OF THE MANAGEMENT been certified for compliance LUKOIL Group entities were the development of targeted by a Decision of the Management SYSTEM with the international standards in effect (covering 83% of total programs and action plans integral Committee of PJSC LUKOIL dated ISO 14001 and OHSAS 18001 LUKOIL Group headcount) to each program 18 May 2018 since 2001. Transition from OHSAS 18001 to ISO 45001–2018 is to start in 2020

PRIORITIES/ Corporate standards are applicable 15 corporate standards of STO STANDARDS to all LUKOIL Group entities 1.6 “HSE Management System” series (approved by Orders TARGETED The Program of Industrial The Programs were approved of PJSC LUKOIL No. 26 dated PROGRAMS, Safety, Improvement of Labor by Order of PJSC LUKOIL No. 28 11 February 2019, No. 86 dated Conditions and Occupational dated 12 February 2019 17 May 2019, No. 98 dated PROJECTS Safety, and Emergency Prevention 11 June 2019, and No. 149 dated AND INITIATIVES and Liquidation of LUKOIL Group 26 August 2019) entities for 2019–20211. The Environmental Safety Program for 2019–20212.

RISK The Material HSE Risks STO LUKOIL 1.6.6 (Order MANAGEMENT Register and the Material of PJSC LUKOIL No. 133 dated Environmental Issues Register 24 July 2019) Corporate HSE are updated on an annual basis. Policy: These Registers are analyzed FURTHER by the HSE Committee INFORMATION of PJSC LUKOIL and approved by the First Executive Vice President of PJSC LUKOIL Management System

COMMUNICATIONS An ongoing contact is maintained Agreement between WITH TRADE UNIONS with authorized occupational the employer and the Trade Union health and safety representatives of PJSC “Oil Company ‘LUKOIL’” and trade unions for 2015–2020

The Integrated HSE Management System audits and corporate control measures and stakeholder engagement practices The composite indicator “Ensuring Regulations on Evaluating is constantly improving it is revised for compliance with the requirements are also being continually revised. KEY PERFORMANCE the Required HSE Levels the Key Performance Indicator annually to accommodate improvements of laws and corporate standards. at LUKOIL Group Entities” comprises “Ensuring the Required HSE Levels which are developed based on external The reporting preparation methodology INDICATORS those related to occupational injuries at LUKOIL Group Entities,” approved and accident rates, and also the key by Order of PJSC LUKOIL No. 196 environmental impacts (pollutant dated 7 December 2017 emissions and discharges, waste management)

1 The targeted program covers a 3-year period and is revised and approved by the management of PJSC LUKOIL on an annual basis. The Program for 2019–2021 was approved in 2018. During the previous reporting period, the program for 2018-2020 was in effect. 2 Likewise.

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OUR GOALS Number of entities where audits of management systems were performed To ensure an advanced level of industrial safety and labor protection 2017 2018 2019 is an overriding priority for the Company 1.

External audits (for compliance with ISO 14001 and OHSAS 18001 standards) 20 19 20 This goal is included in the LUKOIL Group’s Internal audits (for compliance with corporate requirements) 26 27 23 Strategic Development Program. We OUR STRATEGIC GOAL IS TO IMPROVE INDUSTRIAL are striving to comply with global best SAFETY, REDUCE ON-THE-JOB INJURY RATES, ENSURE practices by achieving a low level of risks Notes. External audits are conducted in a three-year cycle in accordance with ISO committee recommendations. During this period, all LUKOIL Group associated with accidents, incidents, ACCIDENT-FREE OPERATION OF PRODUCTION entities that are to be certified and in which certification or supervisory audits are conducted are audited. fires, and emergencies at production FACILITIES, AND CONTINUOUSLY REDUCE OUR IMPACT facilities, labor injuries and occupational ON THE ENVIRONMENT. illnesses. An Integrated HSE Management Measures implemented as part Budget and the Investment Program. program. During 2019, total HSE costs System which functions sustainably is key of the targeted programs are funded In addition, research projects amounted to 0.6% of the Group’s to accomplishing this goal. and form an integral part of the LUKOIL are undertaken as part of the R&D consolidated revenue.

Financing of HSE targeted and investment programs at LUKOIL Group, RUB million MANAGEMENT SYSTEM CHANGES

Programs 2017 2018 2019 During 2019, we proceeded with preparations to adopt Environmental Safety Program, including: 42,412 35,529 35,903 In the lead-up to the integration of the new the new ISO 45001:2018 (in place requirements into the Integrated HSE Management • capital costs 21,927 28,498 30,046 of OHSAS 18001:2007 previously in effect). System, during 2019: It contains up-to-date requirements Industrial Safety Programs, Better Working Environment, Emergency for organizing the occupational health Prevention and Response Program, including: 12,307 10,093 12,008 and industrial safety system providing for the expansion of the management • costs to improve labor conditions and protect health, reduce perimeter. In particular, the standard management and specialist training sessions were occupational injury and occupational disease rates 6,789 4,946 5,281 prescribes that active engagement completed; • costs to reduce accident, incident, fire, and emergency risks 5,518 5,147 6,727 with employees and other stakeholders be put into practice, responsibility R&D, experimental engineering, and scientific technical works in Russia, in contractor relationships be including: 40 80 57 the Key Safety Rules binding on all employees at LUKOIL strengthened, and involvement of senior production facilities were put in place; • environmental protection 23 58 34 management be enhanced. A risk- oriented approach, preventive measures • industrial safety 17 22 23 and actions, and a goal-setting exercise are of great importance. Total 54,759 45,702 47,968 leadership and a heightened culture of safety improvement instruments were implemented; In 2019, corporate standards used Note. (1) When calculating costs at the foreign entities of LUKOIL Group, the 2018 currency exchange rate of USD 1 = RUB 63 and that for 2019 to govern contractor relationships, record of USD 1 = RUB 65 was used. (2) Data on costs under the Environmental Safety Program for 2017 is only provided for Russian entities participating and analyze incidents, occupational in the Program; data for 2018 and 2019 also includes costs at the foreign entities participating in the Program (15 entities in total, see Appendix 8 illnesses and workplace microtraumas, new forms of engagement with employees and contractors “Reporting Boundaries”). (3) The structure of the Industrial Safety Program costs has been amended to reflect the updated Program for 2020–2022. as well as the procedure for registering, were developed; The program for 2020–2022 was approved in 2020. More details of the Program will be provided in the 2020 Sustainability Report. (4) The change warning about and investigating in R&D project costs is driven by funding schedules of approved projects technogenic events were updated. Information about the new approaches employee-oriented digital products for training and raising is included on the agenda of LUKOIL’s awareness were introduced. Safety Days.

During internal audits, entities are evaluated for compliance with the new requirements. Transition to the new standard is scheduled to begin in 2020.

1 Road and vehicle safety aspects are viewed within the scope of personnel travel rules, as well as the rules of fuel trucking to petrol stations, and are factored in the corporate system of labor protection. The bulk of products is supplied to foreign and domestic customers through the transportation systems of Transneft and Russian Railways, as well as by marine and river tankers of third party carriers. LUKOIL does not possess to own rolling stock and tanker fleet.

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LEADERSHIP AND SAFETY CULTURE Promotion through focused Notifications and training The widespread use of digital technologies measures in the organization of compulsory training To enhance employee and management was devoted to 2019 performance, Digital technology An extensive use of digital products, for LUKOIL Group employees, including involvement, work on the implementation the participants discussed both Taking into account the styles such as visualization of all incident through the corporate distance learning of leadership and employee engagement industrial and occupational safety In addition to automation tools for routine of human perception of information, case studies based on investigation system, allows for an optimization of costs instruments was intensified in 2019. This issues and the increasingly stringent procedures (electronic briefings three main promotion techniques reports, is also planned in this area. and a more efficient distribution approach helps to overcome resistance community requirements for oil and issuance of hazardous work permits), are used: visualization, communication An interactive “Culture of Safety” training between compulsory education to change and tighten control over results. companies in the area of sustainable such tools as hazardous work video and motivation. Visualization tools calendar is scheduled to be placed and training aimed at developing development, climate change recording and a “Mobile Inspector” (e.g., a “Leader in Safety” logo printed in facility workshops and group premises. professional, managerial and leadership and environmental protection. software and hardware system are being on documents, work interruption and The calendar will be brought in step competencies. Safety Days implemented at the Company’s facilities. self-check records, accident-free counters, with our “Safety Culture 4.0” mobile app A new, original “Safety Culture 4.0” etc.) remind workers of the need and a built-in augmented reality service The event is held on an annual Leadership visits mobile service was also developed. to ensure behavior-based workplace to transform the calendar into an annual basis1 and serves as an effective safety at all times. For communication training and notification system on all tool for exchanging experience As part of leadership visits, heads development purposes, materials current safety issues. This technology was and HSE best practices identified of business units of PJSC LUKOIL and various safety-related media already used in management trainings; not only at LUKOIL entities but also and LUKOIL Group entities evaluate clips are posted and made available in 2020, sets of training materials by its strategic contractors. At the Safety the level of workplace safety on the internal portal. Employees have been developed and an annual Day held in January 2020, which at production facilities. and teams with notable safety excellence “Management Leadership” training performance are awarded marks program has been launched. of distinction and themed contest prizes.

”SAFETY CULTURE 4.0” MOBILE SERVICE Training performance

Today, the culture of safety cannot advance if modern technologies are not applied, for they simplify and accelerate employee training and awareness, on the one hand, and provide for an enhanced 2017 2018 2019 control over compliance with safety requirements and eliminate the human factor, where required, Amount of training on industrial safety and occupational health and safety on the other. for LUKOIL Group, person-courses 56,481 60,106 59,314

Industrial safety and occupational health and safety for LUKOIL Group – Digital technologies (augmented reality and mobile event or render aid to a colleague in case of a workplace training costs (“Employee training and advanced vocational training”), apps to name but a few) hold great potential to influence incident, when every minute or even second counts. RUB million 327.9 323.2 263.8 human conscience and perception. Digital technologies Instead of reading a long text, it would not take more than are capable of changing human behavior at a far faster a rapid glance at the display to take action. An emergency rate than traditional methods of persuading, thus response rate may not only help preserve one’s health Notes. (1)The data includes actual information on in person and remote employee training. (2)The data on 2017–2019 training costs includes information on Russian entities, as well as on LUKOIL Uzbekistan Operating Company LLC and LUKOIL MID-EAST LIMITED. reducing the human error factor in occupational injuries but may save lives as well. and accidents. Digital products cater to a wide range of workers and guarantee more solid performance. Owing All training services of this app are promptly updated in real to sharp visualization and a non-routine way of presenting time, all at the same time in all regions of the Company’s Right to refuse life-threatening Employee involvement information, they surprise and provoke interest, hold operations. By virtue of a shared mobile app service, work attention and ensure a higher level of mastery of material. the procedure for organizing leadership visits and notifying Through authorized occupational For more information on the technical labor employees of the results has been simplified. One more Employees have the right to refuse health and safety representatives inspection of the IATUO of PJSC LUKOIL see: “Safety Culture 4.0” mobile service is a proprietary LUKOIL useful (or motivating) function of the app is the ability to perform their job duties if they and joint committees (commissions) product that has already gained attention in the industry. to count accident-free days in the entity a worker where consider it impossible to perform for occupational health and safety, Its concept is centered around a rapid integration is employed and the possibility of benchmarking the work without endangering their lives employees can propose measures to be of required data and knowledge into the work flow, the indicator with the entire business sector entities. or health. This right is enshrined in Clause taken to further safety 1. In 2019, the first including through the use of augmented reality. Using only The pilot implementation of the project was completed; 6.1.9 of the Agreement between training for authorized occupational a cellular phone, a worker may find a relevant document, its replication at all Group entities is scheduled for 2020. the trade union and PJSC LUKOIL health and safety representatives get instructions on how to act in case of a non-routine for 2015–2020 and the Key Rules as part of a “Leader in Safety” program of Safety when Staying at Facilities was undertaken. We plan to continue of LUKOIL Group Entities in accordance this practice, with such training to be held with STO LUKOIL “Leadership and Culture at least once a year. of Safety.”

1 This issue is regulated by Section 6 “Health, Safety, and Environment” of the Agreement between the employer and the Trade Union of Public Joint- 1 Safety Days are held in each LUKOIL Group entity at least once every six months. Stock Company “Oil Company ‘LUKOIL’” for 2015–2020.

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OCCUPATIONAL SAFETY Indicators related to occupational injuries at LUKOIL Group

The Company’s key priority of contractor organizations working in the “Required HSE Levels” KPI used 2017 2018 2019 is the preservation of life and health at LUKOIL facilities. Zero fatalities in the financial incentivization system. Lost time accident frequency rate (LTAFR) 0.20 0.20 0.19 of its employees, as well as employees is one of the main criteria outlined Lost time injury frequency rate (LTIFR) – 0.12 0.13

Rate of fatalities – 0.01 0.01

Rate of high-consequence injuries (net of fatalities) – 0.03 0.05

Rate of registered occupational injuries or damage to health – 0.15 0.18

Notes. (1) The lower all indicators are the better. (2) The indicators (other than LTAFR) have been calculated since 2018. (3) The formulae used to calculate the indicators are provided in Appendix 7 “Reference Information: Abbreviations, Definitions Findings of investigations and Calculation Formulae.” In case of safety incidents, measures set forth by laws are communicated to LUKOIL Group of the countries where we are present and corporate entities and business units standards are taken at all LUKOIL Group entities, of PJSC LUKOIL, considered including: at the meetings of the HSE Committee at the Board of Directors Number of occupational accidents and employees injured in workplace of PJSC LUKOIL, and included accidents at LUKOIL Group entities as part of Safety Days program with trade unions and key contractor real-time emergency warning of all injury incidents organizations participating in it. Indicator 2017 2018 2019 at the Company’s facilities, including injuries suffered Total number of occupational accidents, including: 20 21 19 by contractor employees; Findings of incident analysis, including at contractor organizations, • fatal 4 1 2 are incorporated into an annual report • high-consequence work-related injuries NA 5 8 to the Management Committee data logging in the “RISK-IS” corporate information of PJSC LUKOIL on the HSE situation • number of minor injuries NA 15 9 system; and considered at meetings 1 of the Board of Directors. • number of microtraumas NA 3 7 Number of employees injured in workplace accidents (total number investigation, analysis of facts, circumstances and of injuries), including: 22 23 25 causes of workplace incidents. • number of fatalities (FA) 4 1 2

• number of lost time injuries (traumas) (LTI) 18 22 23

Note. If during the reporting period an employee suffered more than one injury, each case is counted as a separate injury.

We regret to say that in 2019 the injury on emergency procedures in case the investigation of a pile-up car accident rate in Russia for LUKOIL employees of danger to health or life was held; on 3 December 2019 in LLC UralOil increased on account of serious road measures to enhance remote (the Perm Territory) was still in progress. accidents. There were four road traffic monitoring of fueling stations are being accidents that resulted in bodily injury considered. There were two incidents at foreign or death, of which two were pile-up entities. At LUKOIL Romania S.R.L. a fuel accidents. As a result, nine LUKOIL Analysis of causes for other incidents station operator fell victim to third party employees were injured and one showed they were primarily related criminal activity. At an Italian oil refinery, employee killed in the car crash. to employee exposures to machinery a worker sustained a leg injury. Following and moving armatures; falling from the investigation, the refinery service area The second incident resulting high elevations and sustaining electrical was analyzed for compliance with safety in the death of our employee shocks at electric power plants. requirements and appropriate measures was an assault related to robbery were taken. at a fueling station in the Voronezh All incidents in 2017–2019 involving region. To reduce this risk in the future, LUKOIL regular employees were fully a briefing for fueling stations personnel investigated. At the time of this Report

1 The term “microtrauma” is used according to the GRI definition.

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INTERACTIONS WITH CONTRACTORS The key areas for action to reduce occupational injury rates and prevent accidents, counting those in 2019, include: We realize our responsibility towards stakeholders and society as a whole Control measures were introduced at various stages and encourage our business partners of cooperation with contractor organizations, to adhere to the environmental including: and social performance principles performance of scheduled measures as part of the OHS program; of our Company. For example, our standard contracts include provisions obligating contractors to follow the provisions set forth in the LUKOIL Group Policy on industrial Pre-tender assessments; safety, occupational health providing workers with efficient modern means of individual and collective protection; and environmental safety in the 21st Century. Technical audits of employee preparedness to perform work The Company regularly reviews contractors at LUKOIL production facilities; implementation of digital tools designed to prevent hazardous situations. For example, the video in terms of compliance with occupational recording of high-risk work and complex change-over switchings for power generation specialists was health and industrial safety requirements organized, as well as a wider use of video briefings; throughout the term of the contract. Thus, in 2019, as part of corporate supervision Inclusion of provisions of the corporate standard and production control in Russian entities STO 1.6.5–2019 “Requirements for Contractor Organizations” of LUKOIL Group, over 7 thousand into contracts; organization of training sessions to raise employee awareness and drill technical skills. Examples audits were conducted. Employees of the measures are as follows: of counterparties were held responsible for the violations committed, and penalties were applied. Contractors took measures Production controls. to eliminate and prevent violations in a timely manner. obligatory mass training sessions using a distance learning system to master occupational safety and first aid in the workplace, in accordance with current legal requirements, We bolster interaction and cooperation • by reducing the risks of accidents, of the respective indicators for the last with our contractors at the Company’s incidents, fires and emergencies 5-year period are indicative of an upward facilities concerning occupational at the facilities of LUKOIL Group general trend (See the chart below safety issues. For example, entities. on page 83). This result has to a great development of an employee self-tutoring and certification service on occupational safety issues, the employees of the Company’s extent been achieved through our efforts suppliers and contractors are trained The indicator “fatal accidents during to regularly inform contractors of safe in occupational and industrial safety the performance of contracting work performance rules at LUKOIL issues and participate in Safety Days. and subcontracting activities facilities, the Key Rules of Safety and other This helps us advance our goal at the Group’s facilities” is included local documents. Representatives performance of tests on knowledge of the Key Rules of Safety and local regulatory acts, of reducing the occupational injury rate: in the comprehensive KPI “Ensuring of the key contractor organizations the Required HSE Levels at LUKOIL Group are invited to regular events aimed • by improvement of working Entities,” which is taken into account at improving the culture of safety, conditions and occupational in the motivation system. including Safety Days. We are committed specialized training sessions for those working at hazardous facilities, safety at LUKOIL Group entities, to proceeding with this work in future. and, as a result, reducing of the level Despite the measures we are taking, of injury rate and occupational we have not yet succeeded in reducing illnesses; the number of accidents year-on- simulator sessions and drills concerning actions in emergency events, year. The findings of our analysis

trainings aimed at improving skills required to operate sophisticated equipment, and other types of training.

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Indicators related to occupational injuries at contractor organizations in Russia and abroad OCCUPATIONAL INJURIES AT CONTRACTOR (SUBCONTRACTOR) ORGANIZATIONS IN RUSSIA AND ABROAD 2017 2018 2019

Total number of occupational accidents, including: 20 9 13 Dynamics of accidents among contractor organizations All accidents at contractor organizations in 2019 were fully investigated, • fatal 7 1 6 except for a group accident at LUKOIL-Komi (a fire at oil mine • high-consequence work-related injuries 4 3 1 No. 1 on 24 November 2019); Number of employees injured in workplace accidents at the time of writing (total number of injuries), including: 25 9 16 the Report the investigation was still ongoing. Information • number of fatalities (FA) 10 1 7 about the facts and circumstances • number of lost time injuries (LTI) 15 8 9 and causes of accidents and preventive measures taken was communicated to LUKOIL employees and the representatives of contractor organizations.

Number of occupational accidents Net of road traffic accidents Trend line

The Safety Day agenda, dedicated to 2019 performance, had a particular focus on improving occupational safety at contractor and subcontractor organizations. Following discussions, Safety Day participants proposed the following solutions to improve the culture of safety:

to proceed with gathering up best practices of collaboration among LUKOIL entities and contractors and subcontractors, and to implement these practices across all LUKOIL Group entities (and issue related charters as part of the Knowledge Management Corporate System).

to organize interactive field trips to LUKOIL production facilities for contractor staff, so that they can best adapt to the specific working conditions.

to continue to hold competitions to identify the best contractor organization in order to integrate partners into the LUKOIL- wide OHS system. Introduce an incentive scheme among contractors to encourage the implementation of best safe work practices.

The proposals were included in the summary document of the Safety Day and will be implemented.

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DIGITAL METHODS OF IMPROVING SAFETY AT OIL REFINING PLANTS

OIL REFINING PLANTS BECAME PLATFORMS FOR THE IMPLEMENTATION OF THE 2019–2021 DIGITAL REFINING DEVELOPMENT PROGRAM, WHICH COMPRISES THE FOLLOWING PILOT PROJECTS 40 INITIATIVES AND 19 PROJECTS. WERE PUT INTO OPERATIONAL TEST:

IN 2019 THE FOLLOWING PROJECTS WERE COMPLETED:

ENTITY PROJECT OUTCOME ENTITY PROJECT OUTCOME

Mobile Inspector Most critical equipment monitored VOLGOGRAD Connected production Implementation of the Process OIL REFINERY through walk-round checks with the use Insight Reliability Advisor system, IN ROMANIA of instrumental control tools (vibrations, OIL REFINERY to improve a vacuum gas oil bearing temperature). hydrocracking unit’s operating reliability, production efficiency, and operational effectiveness.

VOLGOGRAD OIL Digital video surveillance • Integrating the technological video and intelligent video surveillance system with a distributed REFINERY analysis system processing facility control system; • implementing automatic algorithms PERM OIL Predictive analytics Improving the availability of technological of intelligent video data analysis for event equipment through the reduction identification purposes; REFINERY of unplanned maintenance. Identifying • prompt and efficient automatic signs of early equipment deterioration identification of non-routine events; by detecting changes in all streaming • real-time distance monitoring signals, which accurately indicate the date/ of the condition of production equipment time of a malfunction. at the facilities.

OIL REFINERY Monitoring • Reduced instrumentation NIZHNY APC+ enhanced • Creating analogues of virtual analyzers, and online and automated control system management with enhanced accuracy and capability PLANT diagnostic system maintenance costs; NOVGOROD systems of operating without being readjusted IN BULGARIA • reduced equipment failures; OIL REFINERY, over protracted periods. • predictable repair times / needs; • Design of AI to predict future • reliable production management OIL REFINERY conditions of units. and protection. PLANT • Continued improvements IN BULGARIA to the unit optimization model in line with the target criteria set.

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HEALTH IN THE WORKPLACE PIPELINE RELIABILITY AND EMERGENCY PREPAREDNESS

We endeavor to minimize conditions occupational illnesses are registered only The oil mine operated by LUKOIL-Komi that may harm the health of workers. very rarely. No occupational illnesses has long had the most complex working KEY CHANGES AND RESULTS IN THE REPORTING YEAR Our overriding priority is to provide were identified in foreign entities environment. The overall trend in recent high-quality and state-of-the-art of the Company. years has been towards an increase individual personal protection in occupational illness numbers, which ОСНОВНЫЕ ИЗМЕНЕНИЯ И РЕЗУЛЬТАТЫ equipment (PPE) that reduces We have embarked on a large-scale is primarily due to the age structure В ОТЧЕТНОМ ГОДУTHE SPECIFIC COEFFICIENT THE SHARE OF CORROSION- the impact of harmful and dangerous modernization of corporate medical of the workforce. All cases were identified OF PIPELINE FAILURE REACHED RESISTANT PIPELINES workplace factors. This PPE is provided treatment facilities, including renovations during medical check-ups, with some THE MINIMUM VALUE (EXCLUDING INHIBITOR under the respective corporate standard, and building facilities in Usinsk, diseases being caught early, which and its amount and variety exceeds Budyonnovsk, and Urai, modeled is testament to the efficacy of medical FOR THE PERIOD 2016–2019 PROTECTION) ROSE statutory requirements. on the new clinics in Kogalym and Kstovo. screening. Employees with suspected Additional health centers with medical occupational illnesses have in-depth Thanks to a well-developed medical assistants and pharmacy branches have check-ups at in-patient clinics; such OF 0.081 TO 30.4% service system comprising voluntary been established onsite. check-ups are performed free-of- CASES PER 1 KM OF PIPELINES (2016: 23.6%) medical insurance programs and options charge and are financed through public PER YEAR to receive medical attention at local In 2019 cardio check-ups of risk groups contracts. employee health centers in the event by age were performed and mobile of emergencies, a high level of employee teams of cardio specialists checked health is successfully maintained, and new employees working in remote areas.

Number of LUKOIL-Komi Occupational illness dynamics of Russian LUKOIL Group entities A RAPID REPAIR TECHNOLOGY FOR OFFSHORE PIPELINES WAS ACQUIRED workers with newly diagnosed AND TESTED SUCCESSFULLY occupational illnesses, people 2017 2018 2019

Occupational disease rate (ODR) 2019 • per 1,000 workers 0.06 0.19 0.13 201 1

201 • per 1,000,000 man-hours NA 0.11 0.08

Priority areas for taking measures • a medical program to prevent As part of promoting the development to reduce the occupational illness rate occupational illnesses and follow-up of the Yaregskoye field, the use of small at LUKOIL-Komi include: observations of workers in risk mine shafts where more favorable • technical protection of workers groups. working conditions can be ensured from work-related exposure through • in-depth check-ups of employees is under consideration. the use of new technologies, engaged in underground operations, equipment, and effective means as well as those who are frequently of personal and collective protection and chronically ill, by experts (acoustic absorption equipment, from leading Moscow healthcare protective hand equipment, etc.) institutions. • employee timesheets for vibrating • evaluation of the quality of health tool operations, with subsequent check-ups. registrations in log books.

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MANAGEMENT SYSTEM OUR GOALS

ELEMENTS LUKOIL operates a well-developed field frequent check-ups (inspections), were developed; inspections OF THE MANAGEMENT SYSTEM DESCRIPTION DOCUMENTS pipeline system, including the longest especially in areas of potential of products, audits of manufacturers’ offshore pipeline system among Russian flooding or water cut-off zones, as well plants (including unscheduled oil and gas companies (over 550 km as inspections and the preparation ones), and observations were in length). We consistently carry out work of tools to remedy emergency oil spills. performed; and recommendations The Company’s policy related Russia: Federal Law to mitigate pipeline failure risks, and have on the implementation of control OBJECTIVES to improving the functional reliability No. 116-FZ “On the Industrial in place a well-run reliability management In the event of a pipeline failure, response methods and techniques were made. of pipeline transport is governed Safety of Hazardous Production system for oilfield and mainline tools are used to contain it quickly (the If quality violations are repeated, by legal requirements and corporate Facilities,” “Rules for the Safe pipelines1. average response time after an event the supplier is added to the register standards. Operation of In-Field Pipelines” (approved by Rostekhnadzor is detected is between four and six hours, of bad-faith suppliers (‘blacklist’), Order No. 515 dated 30 We are fully aware of the negative depending on the distance and weather and is not permitted to take part November 2017); consequences that can arise as a result conditions). in tender procedures. other federal regulations of pipeline disruption. To prevent • Continuous work is carried and rules on industrial safety potential disruptions to equipment out to maintain a competitive integrity, we continuously monitor Results environment among suppliers the condition of pipeline systems of tubular products with an internal Our priority is to adopt an integrated and use a number of methods to prevent Owing to the active measures being protective coating: bypass PRIORITIES/ Corporate regulations approach to the safe operation (STO LUKOIL 1.19.1-2012; intentional and unintentional damage taken, at the end of 2019 we see experimental field tests of new types STANDARDS of pipelines: inhibitor coating, 1.19.2-2013 and 1.19.3-2013) caused by third parties, including an improvement in all indicators of protective coatings followed the introduction of corrosion- modern leak detection systems, as well characterizing the state of the LUKOIL by issuing expert opinions resistant pipes, timely diagnostics, as the use of unmanned aerial vehicles pipeline system. on the conformity of the products and the prompt elimination of detected to fly over pipeline routes. to the technical requirements defects. In 2019, the failure rate decreased of PJSC LUKOIL Our goal: stabilization and reduction in relation to 2018 by 12%. This dynamic of accidents in pipeline transport 2. was driven by the prompt replacement To prevent potential incidents, we apply of pipe sections that were identified The pipeline failure rate for oilfield Resolution of the Network an integrated approach, including defective (all such sections are to be INDICATORS pipelines, number of failures per 1 km Group “Improvements the following activities: replaced) and a rise in the share of pipes per year. to the Oilfield Pipe and Tubing with a longer service life. In 2019 Reliability Network Group” • timely diagnostics, with a ranking the share of replaced pipelines was 2.4%. (hereinafter Network Group) of risks of detected anomalies THE DYNAMICS and defects; • When replacing sections OF REDUCING • applying corrosion inhibitor of pipelines, more than 60% and electrochemical protection; of the pipes are delivered to facilities THE VOLUME OF OIL SYSTEM The key source of expertise is pro- Regulations on the Knowledge • introducing pipes with internal in an anti-corrosion coating. They AND OIL PRODUCTS IMPROVEMENT vided by the activities of PJSC LUKOIL’s Management System protective coatings and pipes made have an extended service life and do Network Group, which forms part of the Exploration of innovative and alternative materials. not require frequent periodic repairs, SPILLS, AS WELL of the Corporate Knowledge and Production business which significantly reduces operating AS THE FREQUENCY Management System. segment (approved by First Technical diagnostics and corrosion costs. OF PIPELINE FAILURES Executive Vice President monitoring are regularly performed • In-line inspections of interfield R. Maganov on 19 March 2014). as part of preventive measures. Based pipelines have become more IN 2017–2019 The Network Group’s annual on the results of inspections, repair work common, and provide highly reliable IS POSITIVE. IN 2019 work plan was approved is carried out, if necessary, and potentially data and allow the residual life NO SIGNIFICANT OIL hazardous areas are identified, of pipelines to be assessed more for example, in mountainous areas accurately. AND FORMATION at LUKOIL Uzbekistan Operating • The number of inspections of pipeline 3 RESPONSIBILITY The system covers all management The approved annual work plan WATER SPILLS Company sites. transport facilities and the number levels, from senior management of the Network Group as part of maintenance personnel increased. OCCURRED. to specialized units at LUKOIL Group of the Industrial Safety Program In order to prevent spills and to reduce Unmanned control and monitoring entities. environmental impacts, the Company methods are used, including the use Responsible individuals in this area prepares pipelines for the autumn-winter of devices with internal combustion also include the experts and the head season and spring floods, LUKOIL Group engines, which can operate in the of the Network Group. oil and gas production companies Far North. annually develop and implement • Efforts were stepped up measures in advance. Such measures to improve quality control in the area TARGETED Every Russian oil and gas producer has Annual and mid-term investment include an inspection of line shut-off of supplied pipes: requirements PROGRAMS, an investment program “The renovation programs. valves and block valve stations, with more for non-metallic inclusions in pipes and technical re-equipment of pipeline The Integrated Program PROJECTS, transport facilities”. on the Improvement of Oilfield AND INITIATIVES Pipeline Reliability, adopted 1 The information in this section pertains to the Russian entities of LUKOIL Group. by each entity of the Exploration 2 It was approved in the work plan of the Network Group “Improving the reliability of field and tubing” by PJSC LUKOIL dated January 25, 2019. and Production business segment 3 The definition of a significant spill is given in Appendix 7.

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EMERGENCY AND INCIDENT PREPAREDNESS Reliability indicators of Russian pipeline system LUKOIL pays considerable attention • the organization of management, of readiness among governing bodies to ensuring a high level of emergency communications, and notifications and personnel, as well as technical 2017 2018 2019 preparedness. It fully complies in the event of an emergency; readiness. Annual trainings at federal Specific coefficient of pipeline failures1 failure/km/year 0.117 0.092 0.081 with relevant laws of the Russian • information exchange system among and regional levels are conducted, Federation and other countries where the people involved; including to eliminate gas, water, and oil Share of corrosion-resistant pipelines, % 25.2 26.8 30.4 the Company operates. LUKOIL • priority actions to be taken when inflows as well as open blow-outs at oil takes measures annually to maintain an emergency alert is received; and gas condensate fields. A special Volume of oil and oil products spilled in accidents, tonnes 220 32 16 and improve the skills of emergency • measures to ensure public safety; emphasis is placed on conducting rescue units. • the organization of procurement, trainings at LUKOIL marine and river Specific coefficient of spills (kg of spilled oil and oil products per thousand tonnes engineering, and financial support terminals and oil production facilities. of extracted oil and gas condensate) 2.7 0.4 0.2 Plans are in place for all facilities that can for emergency management pose potential sources of emergency operations at a facility. In order to boost knowledge levels Note. A specific coefficient is calculated based on the volume of oil and gas condensate production in Russia (net of the share in related entities). situations, with a view to preventing and professional skills and to build team and eliminating oil and petroleum The priority areas of work in this area spirit and raise the status of rescuers, product spills 1. Respective documents include establishing and developing a second professional skills contest contain all the required information our own emergency rescue units was held in 2019 for employees IMPROVEMENT STRATEGY to facilitate rapid responses and effective consisting of the most experienced staff from non-staff emergency rescue units interaction among those involved at the facilities. 2,063 people made up five of the Company. This event was part The network group continues to search facilities; and bypass (bench) tests This solution significantly boosts in rescue operations, specifically: professional full-time emergency rescue of the 10th Professional Excellence for solutions with which the Company of bimetal pipes are being conducted the operational reliability of high-pressure • potential emergency scenarios on site; units and 43 non-staff emergency rescue Competition of LUKOIL Group employees will be able to achieve its goals in the Komi Republic. water pipes and pipelines in a hostile • the resources required to contain units in 2019. A necessary level of unit for the title Best in the Profession, of improving the reliability of pipeline environment. The equipment has already and eliminate an emergency, the steps readiness is maintained by ensuring that and was held at the Corporate Training transport. New technologies and equipment. been delivered to the Komi Republic required to involve professional they are equipped with modern technical Center. Fourteen teams from oil and gas In 2019 LUKOIL was the first company and to RITEK facilities, and it is planned emergency rescue units; system resources and by improving skills related producing, refining, and transport entities Alternative piping. We see the use to successfully test the Russian to roll out its use as a best practice. of interaction among rescue forces to rescue operations. of the Group took part. of pipes made of alternative materials technology “Beluga” in underwater and use of resources; (non-metallic) with a standard service repairs of offshore pipelines. We Pipe labeling. Company experts • how to ensure a state of constant The most effective training activities life of 30 to 50 years as a major potential had been involved in developing suggested the use of pipe labeling readiness for emergency containment are practical exercises and trainings, area of improvement for pipeline sections this technology for three years. Now, (a product labeled by the respective and elimination; which help ensure a high level exposed to corrosion. In 2019 the length if necessary, repairs can be performed manufacturer). This will help in tracing of non-metallic pipes stood at 3,058 km. quickly, without the need to halt product products, including their reliability Bimetal pipes also have an extended pumping. and quality indicators. An industry service life and are of higher reliability, working group has been set up at RSPP Indicators of Russian LUKOIL Group entities’ preparedness for emergencies as they are made of high-strength steel Another innovation was the introduction to handle this issue. grades. of leak detection and unauthorized 2017 2018 2019 access systems. Self-operated pressure Pilot tests of new pipes made regulators are installed at vulnerable Number of trainings conducted, including on: 193 178 200 of alternative materials are carried out pipeline sections, preventing damage • the elimination of an oil/oil product spill 109 91 117 at LUKOIL-Western Siberia and RITEK from dynamic internal shocks. Number of staff involved in trainings, people 6,640 5,810 6,692

Number of site drills 10,566 11,996 10,739

Number of staff involved in drills, people 75,649 88,300 97,852

1 Pipeline failure means a failure of performance associated with a sudden total or partial shutdown of the pipeline due to break of airtightness of the pipeline itself or shut-off and control valves or a blockage of the pipeline. A pipeline failure does not always entail a spill of oil, oil products 1 In accordance with the Regulations on the Development of Action Plans for the Containment and Elimination of Emergencies at Hazardous or formation water, as well as a gas leak. The calculation uses the total length of pipelines (oil pipelines, gas pipelines and water pipelines). Production Facilities, approved by Russian Government Decree No. 730 dated 26 August 2013.

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THE KOMI REPUBLIC

LUKOIL GROUP ENTITIES OPERATING IN THE KOMI REPUBLIC

LLC “LUKOIL-Komi” − exploration LLC “LUKOIL-Ukhtaneftepererabotka” and oil production on the territory (municipality of the city of Ukhta) - the oldest of six municipalities: Usinsk, Ukhta oil refinery of the Russian industry. and Vuktyl urban districts, as well as Pechora, Sosnogorsk and Izhma municipal districts.

for 2020–2022. Plans include additional work to replace and a permanent hotline to interact with the public. In 2019 the Company continued to operate hazardous sections of pipelines and to rehabilitate The opinions of local residents are taken into account when its hotline, including coverage of environmental safety contaminated sites. deciding on project implementation parameters. issues. 249 calls were received, although most were LUKOIL is taking active steps to improve unrelated to environmental safety. All reports relating the reliability of its pipeline system and the overall On an ongoing basis the Company interacts with suppliers For example, the Company informed Ust-Usa village to the environment were verified, and no violations environmental situation in the Komi Republic. of pipe products with internal protective coatings. residents about the construction of an exploration well of environmental safety standards were identified. A set of measures is implemented annually, In particular, bypass pilot testing of alternative protective at the West Usinskaya facility in 2019. The public opposed including protecting pipes against corrosion; coatings for pipes is conducted, with expert appraisals these plans on account of the proximity of the site LUKOIL-Komi liaises with active public and national the repair, renovation, and technical re-equipment issued on product compliance with PJSC LUKOIL technical to settlements. Following consultations, it was decided organizations, including Komi Voityr, the movement of pipelines; and corrosion monitoring. requirements. to move the construction site and in addition to hold of the Komi-Izhemtsi ethnical group Izvatas, Rus Pechorskaya, regular meetings with an advocacy group of residents and the Pechora Rescue Committee. Cooperation In 2019 more than RUB 7 billion was allocated For example, it was initially planned to use an internal to address a wide range of social issues faced by local agreements are concluded annually with a number of these to environmental protection measures, and over silicate enamel coating for a water pipeline at the Yarega villages. organizations and support is provided to their projects. RUB 4 billion alone was spent on repairing and replacing field. Based on recommendations issued by the Network Furthermore, LUKOIL-Komi representatives participate pipelines in the Komi Republic. To mitigate technological Group’s experts, pilot testing of new types of coatings Another example concerned discussions about a disposal in social movement assemblies and conferences. and environmental risks, pipes with shorter life expectancy were performed over two years to determine the most site for the Shchelyayurskaya group of fields owned are replaced by corrosion-resistant pipes (made of steel reliable solution. As a result, an alternative option was by LUKOIL-Ukhtaneftegaz. In 2018, during public hearings, As part of the Social and Cultural Projects Competition, with internal and external anticorrosion coating). In 2019 selected. PermNIPIneft recommended using the Sigmaline Izhemsky District residents objected to the construction Komi residents are given an opportunity to implement corrosion-resistant pipelines made up 24.4% of the total 2,500 epoxy phenolic coating, with a guaranteed service of the site. In 2019 representatives of the district and public environmental initiatives related to the conservation length of LUKOIL-Komi pipelines. At the same time, life of at least 10 years vis-à-vis quality and material organizations (including Pechora Rescue Committee of the environment and natural objects, and environmental the speed and volume of pipe replacement depends conformity. Replacing the internal protective coating representatives) visited a similar facility, an oil sludge education and culture. For example, 2019 saw the successful on the technical condition of pipelines, and an independent at this facility allowed LUKOIL-Komi to reduce capital disposal site at the Zapadno-Tebukskoye oil field. implementation of the project “Clean River – Clean City” expert organization performs diagnostics and determines expenditure on the construction of a water pipeline to clean the banks and bed of the Chibyu River, using the remaining service life of pipes. Inadequate sections by over RUB 266 million, while at the same time boosting Visitors were shown around the site and informed a grant from LUKOIL-Komi. are subject to prompt repair or renovation; as a result, the operational reliability of the facility. about how it operates, and all their questions were answered. the number of failures declined in 2019. The Pechora Rescue Committee representatives were able to satisfy themselves that the site is a modern and high-tech Overall, the replacement ratio of infield pipelines was 3.2% Complaint management facility that will neutralize oil sludge without any negative in 2019. Pipelines with inhibitor protection comprises 29% environmental impacts. The representatives left positive of the total length of pipelines. The number of personnel LUKOIL Group has a Social Code in place which sets forth feedback about their trip in social networks. involved in the maintenance processes of chemical obligations related to interacting with local communities injection skids and monitoring corrosion inhibitor for field and indigenous peoples. For example, see the Environmental Protection group pipelines rose. At key stages of projects LUKOIL holds consultations In 2019 the Company also elaborated comprehensive with residents whose interests may be impacted organizational and technical measures to reduce by corporate plans. Various communication channels social and environmental risks in the Komi Republic. are used for this purpose, including public hearings The implementation of the measures is scheduled on projects, personal meetings between LUKOIL Group management and specialists and residents,

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THE KOMI REPUBLIC

Oil and gas production In 2018 documents related to the Company’s operations in the Komi in the Komi Republic is carried Republic were approved as part of a corporate biodiversity preservation out by LUKOIL in territories program in the Arctic Zone. Positive experience from the biodiversity populated by dark coniferous preservation program implemented in Uzbekistan was taken into account, and subtundra forests, training sessions were held for staff and contractors, and the registration as well as in the tundra and logging of indicative species of Arctic fauna was introduced. A joint of the Nenets Autonomous project with Russian environmental organizations to monitor indicator bird Area. Consequently and animal species is being executed. In addition to the recording of Red we are obliged to treat Book species of ornithologic fauna, the appearance of other fauna species ARCTIC BIODIVERSITY with care and seek to conserve was also observed. Monitoring continued in 2019. local ecosystems.

TIMAN-PECHORA OIL AND GAS PROVINCE SOCIAL PARTNERSHIP

TOTAL AREA: LUKOIL-Komi is a major mining enterprise in the North-Western Federal District and employer in the Komi Republic, and therefore actively participates in the activities of towns and villages in the Komi Republic. In 2019 the Company THOUSAND SQ. KM. allocated over RUB 800 million to social activities, including under a cooperation agreement between the Government 445.7 of the Komi Republic and PJSC LUKOIL.

ARCTIC AREA: Employment Construction of rural Cooperation agreements outpatient clinics THOUSAND SQ. KM Many residents of the Republic wish The Cooperation Agreement 275 to work with LUKOIL-Komi, as it offers LUKOIL provides support to help with the Government of the Komi 126.7 thousand sq. km attractive social benefits and pay. resolve social issues in the Republic. Republic provides for the financing offshore LUKOIL Komi gives priority to local For example, residents of the Mutny of facilities and activities which residents, and this is enshrined Materik and Shchelyabozh villages are selected in negotiations in cooperation agreements sought our help to renovate with municipalities and the Ministry with the Government of the Republic. rural outpatient clinics. When of Investment, Industry and Transport HYDROCARBON In 2019, 708 people were hired. the results of a building inspection of the Komi Republic. RESERVES OF The approach focuses on hiring young revealed that the current buildings graduates from local professional could not be appropriately We also respond to requests educational institutions; 56 young renovated, LUKOIL-Komi offered from municipalities to build social 2.4 BILLION TONNES employees were recruited in 2019. to build new modern social facilities, facilities. For example, the Yugdom and the Government of the Komi Ice Palace in Usinsk, built with financial OF WHICH OIL Jobs are allocated for the disabled: Republic, represented by the Ministry support from LUKOIL-Komi, hosts ACCOUNTS in 2019, the entity employed of Health, supported the project. a regular hockey tournament 24 disabled local residents, As a result of the joint project new with teams from other cities. FOR and eight jobs were financed outpatient clinics were equipped The city administration requested under an agreement with the Usinsk with wards for 24-hour patient stays the construction of a sports hall City Organization of the Disabled. and daytime hospital procedures, with stands for sports enthusiasts. 60% along with dental, physiotherapeutic As a result, together MAIN SUBSOIL USERS: treatment, and vaccination rooms. with the Government of the Komi As charitable aid LUKOIL-Komi Republic it was decided to build LUKOIL, and the LUKOIL Charity Foundation a second building at the Yugdom Rosneft, bought medical equipment. The clinics Ice Palace. The new building has Gazprom, are scheduled to open in 2020. a hall with 200 seats in which various ZARUBEZHNEFT sports can be played, including five Dobycha-Kharyaga, team member football, volleyball, and Pechoraneft, and basketball. There is also a hall etc. for wrestling and judo.

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SAFETY OF THE ARCTIC RUSSIA ZONE, NORTHERN In Russia, the Arctic Zone1 comprises To enhance the safety of production In 2019, for the second consecutive TERRITORIES not only the continental shelf processes cutting-edge technologies year, LUKOIL made the top three and islands in the Arctic Ocean, are used, including pitless drilling (it ranked first in 2018) based AND OFFSHORE but also the territories (or part and safe production methods for hard- on the results of the Polar Index of them) of eight Russian regions, to-recover oil reserves (HTR reserves). rating (managed by the Project Office FACILITIES in three of which LUKOIL conducts We use pipes with internal protective for the Development of the Arctic operations. The Pyakyakhinskoye coatings, external heat-insulating and the Economics Department and Nakhodkinskoye fields, and water-proof coatings, and electrical of Moscow State University), which LUKOIL’s main gas assets, are being heating for pipes. Field pipeline routes assesses the sustainable development developed in the Yamal-Nenets are inspected from helicopters. of companies working in the Russian Autonomous Area, while in the Nenets Arctic. Autonomous Area LUKOIL extracts oil and natural gas. The village of Varandey is home to Russia’s northernmost oil and petroleum product shipping terminal.

The safety of production activities in the Arctic Zone and northern territories is closely monitored by the public, due to the high risks related to upsetting the ecological balance in these locations. VARANDEY

The Varandey Terminal comprises Oil is supplied from the shore terminal the detection of potential leaks two interconnected facilities located to the loading berth in a cyclical manner of pollutants in real time. Devices ARCTIC onshore and offshore in the Barents via two lines of subsea pipelines, which are used to shut down emergency THE COMPANY, IN ACCORDANCE Sea. Oil is stored in coastal tanks facilitates the continuous heating process equipment. A system WITH ITS INDUSTRIAL for subsequent shipment to ships of the oil and prevents it from freezing to continuously monitor the impact TOTAL AREA: through a stationary, ice-resistant inside the pipe. of production on the environment AND ENVIRONMENTAL SAFETY marine loading berth located is in place. POLICY, SEEKS TO MINIMIZE 22 kilometers from the shore. Varandey We place a special emphasis 29.8 MILLION SQ. KM THE IMPACTS OF LUKOIL GROUP has extensive experience in year-round on the prevention of emergency No significant incidents have marine transportation of large volumes situations and on developing the skills so far occurred during the 11 years ENTITIES’ ACTIVITIES ON THE CLIMATE of oil under icy conditions and wave necessary to eliminate potential of operation of the terminal. LAND AREA: AND BIOLOGICAL DIVERSITY loads. Given the high risk of an accident spills in icy conditions. In accordance in icy conditions, the design with approved Oil and Oil Product OF VULNERABLE AREAS, INCLUDING and construction of the terminal was Spill Prevention and Response Plans, 14 MILLION SQ. KM. THE ARCTIC ZONE OF THE RUSSIAN based on a state-of-the-art design special vessels with equipment FEDERATION. and technical solutions which were for emergency management (under adopted in Russia for the first time: a contract with professional emergency THE POPULATION • the environmental safety system rescue teams) are on 24-hour duty INCLUDES of the shipping berth has three at all offshore facilities of LUKOIL Group levels of protection and operates entities. in an autonomous mode; 30 DIFFERENT PEOPLES ARCTIC ZONE COUNTRIES: • oil shipments are automatically Cooperation agreements have been shut down in an emergency; signed with other companies working Russia Iceland • specially strengthened double- in the Arctic Zone, which facilitates FLORA hulled tankers were built, which can the development of optimum joint The United Norway carry oil shipments all year round; operations to eliminate potential oil States Sweden • the tank farm premises are ringed spills. 20 THOUSAND SPECIES. Canada by a reinforced concrete fence that Finland prevents any release of oil products In order to protect the environment, Denmark into the environment in the event technological processes are FAUNA of damage to the tank. automatically monitored to ensure

>180 SPECIES. 1 An expansion of the boundaries of the Arctic Zone in the Komi Republic is being considered.

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NORWAY INFORMATION SECURITY

Another northern region of expected emissions, the quantity or for underground storage Information security is becoming Requirements related to compliance Ensuring the protection of personal data in which LUKOIL works is Norway. and concentration of chemical (in the absence of economically viable an increasingly important area for the oil with information security rules is an important area of the Company’s While not the system operator, and pollutant discharges, and other gas transportation to consumers). and gas industry. Information security are included in contracts with contractors client-oriented policy. The Company LUKOIL Overseas North Shelf AS data. threats raise the risk of accidents (violations constitute grounds uses access control to internal is a participant in two license projects The projects use modern technologies as well as the scale of their impact. for imposing penalties) as well networks, application and system- on the Barents Sea shelf. At the time The documents are discussed to ensure safety and to boost energy LUKOIL-Technologii has established as in the job descriptions of employees. wide levels, means for recording of preparing this Report, both projects at a public hearing attended efficiency. Digital solutions are being an information security unit that Non-compliance with the rules and keeping a log of users’ activity, were in the exploration stage. by representatives from Greenpeace, actively introduced into production is staffed with highly qualified specialists. represents a serious violation of work antivirus software, password systems the Norwegian Directorate of Fisheries, processes, and modern software In accordance with the Federal Law discipline and work duties. Each incident for networks and information systems LUKOIL Overseas North Shelf the Norwegian Institute of Marine products are used in geological “On the Security of the Critical is investigated. that process personal data, firewalling AS ensures high standards Research, the Norwegian Polar and geophysical studies and for well Information Infrastructure of the Russian tools, and physical access controls. of operations in accordance Institute, and other stakeholders. drilling. Federation,” LUKOIL Group entities To ensure the reliability of information The safeguarding of personal data with the recommendations LUKOIL presented information have categorized critical information systems, vulnerability analysis is carried is also ensured through trainings of the KonKraft1 report at the hearing on its corporate LUKOIL Overseas North Shelf AS infrastructure facilities. A qualitative out before commissioning and during and methodological support “Competitiveness – a changing principles and experience is an active participant in cross-industry assessment has been made of potential operation, and methods of safe software for employees. tide on the Norwegian continental in implementing environmental initiatives and in projects in Norway damage due to the loss of integrity, development are being introduced. shelf.” The document standardizes protection and industrial safety aimed at reducing risks and ensuring confidentiality, or accessibility. the approaches to interaction measures when implementing projects responsible environmental activities among operators of oil and gas in Russia and abroad, including in Arctic Zone projects, such as ACCES A monitoring center works continuously To further improve information security the following production projects and third-party the zero-emission principle. (2016–2019). to detect weaknesses at an early stage, main projects are planned: service companies. The requirements depending on the degree of criticality of KonKraft have been taken into As a participant in offshore of an information resource, and risk account in the management system exploration and production projects, mitigation measures are elaborated of LUKOIL Overseas North Shelf AS LUKOIL Overseas North Shelf AS and implemented. and its emergency response program. takes into account best practices increasing the level of automation of cybersecurity operations, in reducing emissions and gas flaring. chiefly in terms of providing user authority in information In accordance with Norwegian law, A decision was made to electrify systems and monitoring its appropriate use when preparing for well construction onshore and offshore facilities, which the project operator, on behalf of all contributes to the reduction of GHG partners (participants), sends a package emissions and prevents the use of documents to regulatory authorities, of gas turbines on the shelf. To avoid designing information security systems for significant facilities which contain comprehensive associated petroleum gas flaring2, gas under critical information infrastructure information on the volume injection is used to enhance oil recovery

upgrading and replacing obsolete security tools.

1 KonKraft is a platform for interaction between state authorities, oil and gas companies, and the industry association, whose main purpose is to come up with mutually beneficial solutions to enhance the competitiveness of the industry through coordinated approaches, including in the field of safety, environmental protection, and climate change. 2 Associated petroleum gas flaring is prohibited on the Norwegian shelf, except in emergency situations (emergency flaring).

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ENVIRONMENTAL PROTECTION 103 ENVIRONMENTAL SAFETY PROGRAM 106 WATER

Q WHAT TASKS DID Q HOW DOES THE COMPANY 114 THE COMPANY DEAL WITH AS PART PARTICIPATE IN THE BUSINESS EMISSIONS OF THE ENVIRONMENTAL SAFETY AND BIODIVERSITY INITIATIVE? PROGRAM IN THE REPORTING YEAR? 117 A The implementation of the environmental program A Biodiversity conservation is a priority within LUKOIL’s WASTE in 2019 enabled us to improve our performance vis-à-vis key environmental policy. We conduct regular environmental environmental impacts. Some activities were aimed at further monitoring and implement projects to restore and increase Igor Zaikin expanding the value-added use of associated petroleum fish populations and vegetation, including rare species. gas, resulting in this indicator rising to 97.5% in Russia In 2018 the Company joined an initiative as part of the Russian Head and 98.9% abroad. At the same time, APG flaring fell by 6%. federal project entitled Conservation of Biological Diversity 120 We also managed to reduce air pollutant emissions across and the Development of Ecotourism, and became of HSE Department BIODIVERSITY the Group. Thanks to the projects implemented, we achieved a member of a task force of the Ministry of Natural Resources of PJSC LUKOIL CONSERVATION the key performance indicator for waste management activities, and Environment of the Russian Federation. with the volume of waste disposal matching that of waste Recently we launched a new project aimed at restoring generation. and protecting the saiga population. This species of antelope In line with the Company’s plans related to climate change, a new is on the verge of extinction and is planned to be included unit was created in the HSE Department, which will coordinate in the Red Book of Russia. Our joint efforts with the Russian 122 activities on greenhouse gas emission management and adapting Ministry of Natural Resources and the governments BIODIVERSITY to climate change, and prepare proposals for long-term targets. of the Republic of Kalmykia and the Astrakhan Region will CONSERVATION make an important contribution to maintaining the ecosystem PROGRAM of the Caspian Region. A roadmap for saiga conservation has IN UZBEKISTAN already been approved, and the project strategy, together with specific activities, are being developed. WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

KEY CHANGES AND RESULTS IN THE REPORTING YEAR ENVIRONMENTAL SAFETY PROGRAM

RUSSIAN ENTITIES CUT AIR A DECISION WAS MADE According to LUKOIL’s Health, Safety In addition, the Company continued and Environment Policy, environmental to enhance data preparation methods POLLUTANT EMISSIONS BY TO LAUNCH A JOINT PROJECT protection is one of the Company’s in line with the GRI Standards, WITH THE MINISTRY OF NATURAL priorities. The integrated management and disclosures are being expanded THE ENVIRONMENTAL RESOURCES AND ENVIRONMENT 7.2% system and the actions taken to better inform stakeholders. SAFETY PROGRAM OF THE RUSSIAN FEDERATION in 2019 to improve the environment 1 ON SAIGA ANTELOPE are described in detail in the Safety For the first time, this Report includes FOR 2019–2021 CONSERVATION IN THE “BLACK section (see page 72). disclosures on the environmental impacts CONSISTS OF LANDS” NATURE RESERVE of the refinery in Italy (ISAB S.r.l.) and oil AND THE “STEPNOI” RESERVE To enhance our environmental product supply entities abroad (IOOO protection management system, LUKOIL Belorussia and LUKOIL-BULGARIA 10 SUBPROGRAMS LUKOIL systematized biodiversity EOOD). As before, the disclosures AND INCLUDES OVER conservation initiatives in 2019 as part on the refineries LUKOIL Neftochim Burgas of the expansion of our activities AD (Bulgaria) and PETROTEL-LUKOIL S.A ALL PRODUCTION WASTE GENERATED BY THE RUSSIAN ENTITIES WAS FULLY DISPOSED OF, in this area. Criteria and approaches (Romania), as well as the Uzbek 900 AND THE AMOUNT OF PRE-PRIVATIZATION WASTE DECREASED BY were developed to make our activities production project LUKOIL Uzbekistan EVENTS, more systematic and to obtain more Operating Company LLC, data on which 2 measurable results. are disclosed from 2018, are included. 17% 45 RUSSIAN AND FOREIGN ENTITIES OF LUKOIL GROUP PARTICIPATE IN THE PROGRAM. In 2019 PJSC LUKOIL was rated in the top five in the environmental transparency rating of Eurasian oil and gas companies. The rated CONTEXT companies’ potential impact on the environment and their information transparency were assessed by the World Wildlife Fund (WWF) Most of the budget of the 2019 Russia and CREON Group. In total, the rating included 20 companies Environmental Safety Program from Russia (producing more than 1.5 million tonnes of oil and gas (RUB 35.9 billion) was spent on measures Environmental issues received significant attention Experts and scientists point out the urgent need to intensify condensate), 14 companies from Kazakhstan and 2 from Azerbaijan. to increase the sustainable use in the assessment of contributions to the UN Sustainable collaborative efforts of governments, companies and public of associated petroleum gas (around Development Goals in 2019. The main reason for this was organizations. In particular, green investments equating 40% of the costs of the Program) the poor progress made in improving the environmental to 2% of a country’s GDP could facilitate long-term growth and the reliability of pipeline transport. situation globally. and at the same time reduce negative impacts on climate, water resources and ecosystems3. Generally, three of the 17 UN Sustainable Development Goals are classified as relating to the environment1. According The accelerated adoption of existing production to the Sustainable Development Goals Index2, no progress and environmental technologies, the active use of scientific was made on any goal in 2019. Significant challenges remain, data, and greater funding for solutions to environmental particularly as far as the preservation of healthy oceans issues were identified as the most urgent tasks, including and biodiversity on land is concerned. for companies, since human health and well-being directly depends on the state of the environment.

1 Planning of activities under the target program is synchronized with corporate medium-term planning procedures. The program is developed for three years and is annually reviewed. During the previous reporting period, the target program for 2018–2020 was in effect. 2 The Environmental Safety Program for 2018–2020 involved 53 LUKOIL Group entities. As a result of some organizational changes (consolidation of a number of entities in the Russian Oil Product Supply business sector and transfer of responsibility for the Transportation business sector 1 SDG 6 (Clean Water and Sanitation), SDG 14 (Life below Water) and SDG 15 (Life on Land). Nevertheless, given the interconnectedness to LUKOIL-Trans), the number of entities participating in the Program decreased, but the number of production facilities did not change as compared of all the 17 UN goals, the environment also affects the achievement of the other goals. to 2018. 2 Source: the Sustainable Development Goals Index, https://www.sdgindex.org/ 3 Source: Global Environmental Outlook 6, UN Environmental Programme, 2019.

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Non-standard payments1 in the reporting fine of RUB 68.9 million was paid for the Komi Republic against LUKOIL- Indicators of LUKOIL Group’s Environmental Safety Program year accounted for 4% of total penalties under a lawsuit filed by the Department Komi for environmental damages. based on negative environmental of the Federal Service for Supervision impacts. In 2019, a significant of Natural Resources Management 2018 2019 GOALS FOR 2021

UTILIZATION LEVEL OF ASSOCIATED PETROLEUM GAS, % 0.2 pp A further rise in the indicator’s value Across LUKOIL Group LLC LUKOIL-Komi’s operating In 2016, a plan of organizational due to the lack of in situ treatment division Yareganeft is developing and technical measures technology . A proposal from Tomsk the Yaregskoye field, one of the oldest for rehabilitation of the disturbed State University on how to solve POLLUTANT EMISSIONS INTO THE ATMOSPHERE, sources of high-viscosity oil in Russia. territories and water bodies was this issue was received in 2019 THOUSAND TONNES In April 2016, the Yarega River drafted, and the Company started and is currently being considered. A 5% decline Across LUKOIL Group and the Maly Voyvozh stream near to implement it immediately, before Depending on the results, a decision 451.3 428.7 at Russian entities the Yarega settlement, Ukhta District, the final decision on the case was will be taken on the feasibility 7.2% compared to 2018 Across Russian of this technology. were heavily polluted with oil products, made. In 2016–2019, LUKOIL-Komi entities following an oil spill from old wells. carried out cleaning and remediation 433.3 402.3 The Department of the Federal of the nearshore zone of the Yarega The measures taken by LUKOIL-Komi Service for Supervision of Natural River and streams flowing into to mitigate the impacts of Yareganeft’s WASTEWATER DISCHARGED INTO SURFACE WATER Resources Management for the Komi it, with a total area of 20 km. Sediment activities on water bodies include OBJECTS, MILLION CUBIC METERS Republic brought a lawsuit against was cleaned in the area of the crossing construction of new treatment 1 LLC LUKOIL-Komi for damage caused of the stream at the “Yareganeft” facilities. Construction started Across Russian to the environment. After litigation production site, from the crossing in 2016 and was completed in 2019. 0.9 entities 10.7 A further reduction lasting over two years, the Arbitration to the mouth of the Maly Voyvozh In 2019, the facilities also underwent 10.1 is the share of in the indicator’s value Court of the Republic of Komi ruled stream, and at the section of the Yarega pre-commissioning and essential LUKOIL-Ukhtaneftepererabotka, an 8% drop at oil and gas production on 8 April 2019 to satisfy the claimant’s River to the inflow into the Izhma River. retrofitting. Commissioning entities and a 9% drop at transportation claims, ordering LUKOIL-Komi The cost of the work performed was is scheduled for 2020. entities to pay RUB 68.9 million in damages taken into account when determining to the Department of the Federal the amount of damage in the litigation. Service for Supervision of Natural WATER CONSUMPTION FOR OWN NEEDS, MLN CUBIC METERS Resources Management of the Komi At the same time, the cleaning 1% A reduction in the indicator’s value Republic. of bottom sediments was complicated Across Russian 354.9 entities 358.0

DISPOSAL OF WASTE ACCUMULATED DURING THE PRE-PRIVATIZATION PERIOD, THOUSAND TONNES To reduce waste by 250 thousand 107.0 Across LUKOIL Group 69.0 tonnes across Across Russian the entire Group 50.0 entities 51.0 in 2019–2021

REHABILITATION OF CONTAMINATED LAND, HECTARES About 40 hectares Across Russian per annum 50.3 entities 56.6

MINIMIZING THE IMPACTS OF OPERATIONS OF LUKOIL GROUP ENTITIES Confirmation based ON THE BIODIVERSITY OF VULNERABLE TERRITORIES, INCLUDING on in-production THE RUSSIAN ARCTIC ZONE environmental controls and monitoring Providing in-production Across Providing in-production of environmental environmental controls LUKOIL Group environmental controls and monitoring and monitoring components to check of environmental of environmental components that the Company’s components activities have no Identifying indicative animal impact on biodiversity; species for the Biodiversity improvement Conservation Program of management mechanisms

1 Non-standard payments, inter alia, may arise due to delays in obtaining permit documents. Note. Data for LUKOIL Group for 2018 1 The indicator growth for LUKOIL Group is solely due to the classification of LUKOIL- are presented in accordance with 2018 reporting Ukhtaneftepererabotka wastewater in 2019 as insufficiently treated as the discharge rates had boundaries, and for 2019 – in accordance with 2019 been aligned with the concentration levels for top-class fishery water bodies. 104 reporting boundaries. 105 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

WATER Water withdrawal and consumption by LUKOIL Group entities, million cubic meters

2017 2018 2019 Water is used in all production cycle of which are major water users. We integrated into the “Clean Water” stages from exploration and production are also committed to the most efficient subprogram. To improve the water Water withdrawal across LUKOIL Group of hydrocarbons to the delivery of finished use of fresh water in our production use system, the Company builds, products to the consumer. and refining processes. Fresh water renovates and re-equips water treatment Within the boundaries for 2018 – 449.8 464.0 accounts for 59% of total water withdrawn and wastewater treatment systems. Within the boundaries for 2019, including: – – 694.0 Our key approach to solving the issue by LUKOIL Group entities1. of sustainable water use involves applying Russian entities 511.1 428.5 441.0 water recycling and reuse systems As part of the corporate Environmental The share of electric power entities 331.9 297.7 303.6 at the refineries’ production facilities Safety Program, water resource and power generation facilities, both management activities have been Foreign entities (without ISAB and oil product supply entities) – 21.3 23.0

• ISAB – NA 229.9

In 2019, the following priority projects were implemented: • Oil product supply entities – NA 0.1

Water consumption for own needs (household, industrial, other) by LUKOIL Group – Renovation of biological treatment Upgrades to biological treatment facilities facilities at the Ukhta Refinery at the Saratovorgsintez plant Within the boundaries for 2018 – 374.4 379.0 Within the boundaries for 2019, including: – – 609.0

Russian entities 376.4 354.9 358.0

Foreign entities (without ISAB and oil product supply entities) – 19.5 21.0

The treatment (disposal) of wastewater The construction and renovation of formation • ISAB – NA 229.9 from combined cycle plants and elimination (produced) water treatment systems of old settling basins of oil mine treatment at LUKOIL-Perm • Oil product supply entities – NA 0.1 facilities at LUKOIL-Komi Other operations

LUKOIL Group, including: – 34.5 28.9 WATER WITHDRAWAL Russian entities NA 34.5 28.1 Our commitment to the sustainable use of natural Foreign entities (without ISAB and oil product supply entities) – 0.0 0.8 Our operations in Russia are carried out resources, including water, covers: in regions that have ample water resources, • ISAB – NA 0.0 with the exception of regions with high • Oil product supply entities – NA 0.0 population density and concentrated economic activity in southern Russia minimizing impacts of operations, and reducing fresh water Unused water transferred to third-party consumers by LUKOIL Group (Astrakhan and Volgograd Regions, withdrawal the Stavropol and Krasnodar Territories). LUKOIL Group, including: – 40.9 56.1 Russian entities NA 39.1 54.9 Among foreign countries, Uzbekistan and Iraq are classified as having low water reducing operational dependence on potential external Foreign entities (without ISAB and oil product supply entities) – 1.8 1.2 levels. In these countries there are risks unfavorable factors, including natural ones (droughts, of frequent droughts, lack of drinking water shrinking of surface water bodies, and pollution • ISAB – NA 0.0 and interruptions in the supply of clean of underground sources). • Oil product supply entities – NA 0.0 water to the local population.

In Russia, around 84% of the volume Note. (1) Data on LUKOIL Group are published in the Report starting from calendar year 2018 (reporting year). (2) In 2018, the methodology of water withdrawal is taken by LUKOIL In 2019, the volume of water withdrawal Water withdrawal by organizations for accounting for water use in Russian entities was improved by eliminating duplicate accounting for water used in intra-group transfers (between entities from surface and underground by Russian entities changed insignificantly of the business sector “Power Generation” LUKOIL Group organisations). (3) Other operations include: formation water injected into absorbing underground formations; household wastewater received from other users by LLC LUKOIL-Ukhtaneftepererabotka and transferred to its treatment facilities. water sources. Water is mainly withdrawn compared to the 2018 level. The general accounts for about 69% of water from the Ob, Pechora, Volga, Don indicators of water withdrawal and water withdrawal in Russian organizations and Kuban river basins in accordance consumption in Russia are significantly and for about 44% of the volume of water with respective permits and within affected by the organization withdrawal for LUKOIL Group. established quotas. of the electric power industry.

1 Within the reporting boundaries of 2019.

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Total water withdrawal by LUKOIL Group entities by water withdrawal sources, million cubic meters WATER CONSUMPTION

Oil and gas production entities with the decommissioning of obsolete to the sea without being used in other 2017 2018 2019 of LUKOIL Group mainly use water equipment to boost water use efficiency. production processes and without being for formation pressure maintenance contaminated. Water withdrawn, total in LUKOIL Group – and in the desalting of produced oil. Power generation entities use Within the boundaries for 2018 – 449.8 464.0 water to generate steam and cool The Italian refinery (ISAB) withdraws Refining, Marketing and Distribution equipment in thermal power plants. water for production purposes Within the boundaries for 2019 – – 694.0 business segment entities (excluding The water consumption3 from the Mediterranean Sea. After Water withdrawn by water withdrawal sources, including: the business sector “Power Generation”) for own needs by the organizations desalting, sea water is used to cool oil totally consume for own needs around 47% of the business sector Electricity processing facilities. In order to reduce 1) from surface sources of all water used1 across LUKOIL Group. is about 62% of the water consumption water consumption at the plant, Within the boundaries for 2018 – 287.0 290.0 The Company implements measures structure of Russian organizations part of the steam condensate circuit annually to optimize water consumption. and about 36% of the water consumption and the recovery system has been Within the boundaries for 2019, including: – – 340.5 In 2019 a new water recycling system of LUKOIL Group. optimized, and measures have been Russian entities, including: 279.7 267.6 269.7 was introduced at the Korobkovsky GPP, taken to reuse sea water after treatment. which resulted in reduced consumption The Group’s oil and gas production, • sea water NA 11.4 11.0 of make-up2 water. There are plans transportation and refining organizations Specific water consumption by Russian • water from other surface sources NA 256.2 258.7 to implement investment projects use water withdrawn from the sea. entities remains relatively stable across all for the construction of a boiler water Water from the Caspian Sea is used business sectors. Foreign entities, including: – 19.4 70.8 treatment unit at the Nizhny Novgorod by LUKOIL-Nizhnevolzhskneft to cool • sea water (without ISAB and oil product supply entities) – 0.0 0.0 Refinery and the upgrading of the water equipment and is returned chilled recycling units at the Volgograd Refinery to almost its natural temperature back • ISAB – NA 50.5 • Oil product supply entities – NA 0.0 • water from other surface sources (without ISAB and oil product supply entities) – 19.4 20.3 Specific water consumption for operational needs by Russian LUKOIL Group entities, broken down • ISAB – NA 0.0 by types of activity • Oil product supply entities – NA 0.0 2) from underground sources 2017 2018 2019 Within the boundaries for 2018 – 99.0 102.3 Oil and gas extraction, cubic meters/tonne of oil equivalent in hydrocarbon resources 1.0 1.0 1.0 Within the boundaries for 2019, including: – – 104.8 Russian entities, including: 76.1 97.1 99.7 Oil processing, cubic meters/tonne of processed oil 0.5 0.5 0.5 • fresh water NA 64.7 61.2 Petrochemicals, cubic meters/tonne of processed raw materials 7.3 6.4 6.9 • other water NA 32.4 38.5 Oil product supply, cubic meters/tonne of oil products sold 0.07 0.10 0.07 Foreign entities, including: – 1.9 5.1

• fresh water (without ISAB and oil product supply entities) – 0.04 0.04 Transportation, cubic meters/tonne of oil, oil products transported 0.02 0.02 0.01

• ISAB – NA 2.5 Power generation, cubic meters/tonne of oil equivalent in consumed fuel 34.4 34.0 35.3 • Oil product supply entities – NA 0.0 • other water (without ISAB and oil product supply entities) – 1.9 2.6 Notes. (1) Specific indicators are calculated based on volumes of water consumed by LUKOIL Group entities for their own needs. (2) Fluctuations in the indicators of petrochemical and oil refining entities are mainly due to a change in the volume of products produced. (3) The performance • ISAB – NA 0.0 of the indicator of the Power Generation business sector is explained by the fact that in 2019, along with a decrease in production due to a warm winter, a number of standard technical measures were taken at LLC LUKOIL-Kubanenergo and LLC LUKOIL-Stavropolenergo. (4) The change • Oil product supply entities – NA 0.0 in the methodology for accounting for water use in 2018 did not affect the value of the indicators for 2017. 3) from other sources (centralized water supply systems, etc.), including – 63.8 248.7 Russian entities 155.3 63.8 71.6 Foreign entities, including: – 0.0 177.1 • without ISAB and oil product supply entities – 0.0 0.1 • ISAB – NA 176.9 • Oil product supply entities – NA 0.1

Note. (1) Data on LUKOIL Group are published in the Report starting from calendar year 2018 (reporting year). (2) In 2018, the methodology 1 In this case, the volume of water consumed for own needs by the Refining, Marketing and Distribution business segment of total consumption for accounting for water use in Russian entities was improved by eliminating duplicate accounting for water used in intra-group transfers (between for own needs by LUKOIL Group is implied. LUKOIL Group organisations). (3) Since 2019, the volume of water intake has been calculated with the release of data on sea water. (4) The data 2 Make-up water is water that has been chemically and thermally processed and is intended to compensate water losses in heat-consuming facilities on the volume of water intake from underground sources includes formation water subsequently injected into the underground formations. (5) Water and heating networks. withdrawal from other sources includes wastewater from utilities taken and transferred to treatment facilities without use by Group organizations. 3 In this case, the volume of water consumed for own needs of the “Power Generation” sector from the total consumption for own needs of LUKOIL Group and Russian entities is implied. 108 109 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

WATER REMOVAL AND WASTEWATER QUALITY Water discharges by LUKOIL Group entities, million cubic meters

The Company monitors wastewater building wastewater treatment facilities quality on an ongoing basis, paying for the Yareganeft oil and mines division 2017 2018 2019 special attention to biological, of LUKOIL-Komi (the facility is scheduled chemical and physical properties to be commissioned in 2020) Total water discharged across LUKOIL Group – of water. Improving the quality and refurbishment of treatment facilities Within the boundaries for 2018 – 352.5 357.6 of wastewater is one of the objectives at the Ukhta Refinery. An upgrade Within the boundaries for 2019, including: – – 568.0 of the Environmental Safety Program. of biological treatment facilities CLEAN Russian entities 236.4 337.6 344.3 Compliance with established standards at the Saratovorgsintez plant is currently AND TREATED WATER Foreign entities (without ISAB and oil product supply entities) – 14.9 13.3 is monitored by LUKOIL laboratories underway. as part of in-production environmental AS PER THE CURRENT • ISAB – NA 210.3 controls, as well as by independent Oil refining1 and petrochemical entities STANDARDS ACCOUNTED • Oil product supply entities – NA 0.1 certified organizations. in Russia do not discharge polluted Water discharge by destination wastewater into surface water bodies. FOR Wastewater generated 1. water discharge into surface water bodies for LUKOIL Group (without water discharges into the sea) from the production process In 2019, the share of polluted wastewater 97% Within the boundaries for 2018 – 218.1 216.5 is transferred to treatment facilities, which in the total water discharge into surface OF TOTAL DISCHARGES use mechanical, biological and physical- water bodies by Russian entities rose Within the boundaries for 2019, including: – – 216.6 chemical treatment methods. Measures to 5% due to a change in the permitted INTO SURFACE WATER Russian entities NA 203.4 203.4 are taken to identify and prevent any discharge rates for the biological BODIES. Foreign entities (without ISAB and oil product supply entities) – 14.7 13.1 potential negative impact associated treatment facilities at the Ukhta Refinery • ISAB – NA 0.0 with wastewater disposal. (Komi Republic). • Oil product supply entities – NA 0.1 The main activities aimed at improving 2. water discharge into the sea wastewater quality at oil and gas Within the boundaries for 2018 – 11.3 10.9 production entities in 2019 included Within the boundaries for 2019, including: – – 221.2 Russian entities NA 11.3 10.9 Foreign entities (without ISAB and oil product supply entities) – 0.0 0.0 • ISAB – NA 210.3 • Oil product supply entities – NA 0.0 3. water discharge into underground formations At the Ukhta Refinery, after going However, due to a dramatic change A reconstruction plan has been drafted through the biological treatment in the country’s economic situation, and the four stages of the project Within the boundaries for 2018 – 104.2 106.7 facilities, wastewater is discharged the project was not implemented in full. to upgrade the plant’s biological Within the boundaries for 2019, including: – – 106.7 into a surface water body (the Ukhta More stringent requirements of Russian treatment facilities were already Russian entities NA 104.0 106.5 River). In addition to wastewater environmental legislation have resulted completed in 2017-2019. The full Foreign entities (without ISAB and oil product supply entities) – 0.2 0.2 from production processes, the plant in the existing biological treatment upgrade of the facilities is scheduled receives and disposes of wastewater facilities no longer being able to provide to be finished in 2023. By then, • ISAB – NA 0.0 from a municipal organization the necessary quality of wastewater established standards for wastewater • Oil product supply entities – NA 0.0 Municipal Unitary Entity (MUE) (in line with the level of maximum quality will have been achieved. 4. water transferred after use to a third party (excluding intra-group exchange) Ukhtavodokanal that supplies water permissible concentrations of harmful Within the boundaries for 2018 – 18.4 23.4 to Ukhta residents. The volume substances in fishery water bodies). of utility wastewater accounts for 83.5% Within the boundaries for 2019, including: – – 23.4 of the total plant’s wastewater. The Company acknowledges Russian entities NA 18.4 23.4 the importance of treatment facilities Foreign entities (without ISAB and oil product supply entities) – 0.0 0.0 The treatment facilities were built in 1967; not only for the refinery, but also • ISAB – NA 0.0 the third phase of the project was begun for the city, and is implementing • Oil product supply entities – NA 0.0 in the early 1990s and was supposed an environmental project to improve the treatment of wastewater. to improve the quality of wastewater. 5. other water discharge LUKOIL Group, including: – 0.5 0.1 Russian entities NA 0.5 0.1 Foreign entities (without ISAB and oil product supply entities) – 0.0 0.0 • ISAB – NA 0.0 • Oil product supply entities NA 0.0 –

Note. (1) Data on LUKOIL Group are published in the Report starting from calendar year 2018 (reporting year). (2) In 2018, the methodology for accounting for water use in Russian entities was improved by eliminating duplicate accounting for water used in intra-group transfers (between LUKOIL Group organisations). (3) The volumes of water discharge into underground formations include formation water supplied for injection into absorbing formations. (4) In order to optimize the presentation of data, taking into account the expansion of the reporting limits in 2019, the format of the presentation of information on water disposal for the receiving facility was specified in comparison with the format of the Report for 2018: water disposal to surface water bodies (214.7 million cubic meters) by Russian entities and 14.7 million cubic meters by foreign organizations) is presented by category of recipient. 1 Except for LLC LUKOIL-Ukhtaneftepererabotka. (5) The content of hazardous chemicals (hazard class II - mainly lead) in the total volume of wastewater discharged into water bodies was only 8 kg. 110 111 WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

Water discharges into surface water bodies by wastewater quality across LUKOIL Group, million cubic CIRCULATING WATER meters Facilities of power generating entities and oil-refining and petrochemical production facilities in Russia are equipped with circulating process water supply systems. New production facilities are required to be equipped with circulating and recycled water supply 2017 2018 2019 systems and treatment facilities.

Total water discharged into surface water bodies for LUKOIL Group, including: – – 437.8 Volumes of circulating water supply and reused water in LUKOIL Group entities, million cubic meters by Russian entities 236.4 214.7 214.3 by foreign entities (without ISAB and oil product supply entities) NA NA 13.1 2017 2018 2019 • ISAB NA NA 210.3 • Oil product supply entities NA NA 0.1 Russian entities Water discharge into surface water bodies by wastewater quality, Volume of circulating water supply 2,253.1 2,284.2 2,240.9 including: Volume of reused-sequentially used water 875.5 896.5 865.1 clean standard-quality wastewater for LUKOIL Group – – 405.6 Foreign entities by Russian entities 206.2 186.3 186.8 by foreign entities (without ISAB and oil product supply entities) NA NA 8.9 Volume of circulating water supply (without ISAB) NA 198.9 213.2 • ISAB NA NA 209.9 • ISAB NA NA 0.8

• Oil product supply entities NA NA 0.0 Volume of reused-sequentially used water (without ISAB) NA 1.1 1.2 wastewater treated to standard quality for LUKOIL Group – – 20.6 • ISAB NA NA 1.0 by Russian entities 29.1 27.5 16.8 by foreign entities (without ISAB and oil product supply entities) NA NA 3.3 • ISAB NA NA 0.4 • Oil product supply entities NA NA 0.1 polluted wastewater for LUKOIL Group – – 11.6 by Russian entities 1.1 0.9 10.7 by foreign entities (without ISAB and oil product supply entities) NA NA 0.9 • ISAB NA NA 0.0 • Oil product supply entities NA NA 0.0

Note. Polluted water is insufficiently treated water and wastewater that is not treated.

Specific discharges of insufficiently treated wastewater into surface water bodies by Russian entities of LUKOIL Group

2017 2018 2019

Oil and gas extraction, cubic meters/tonne of oil equivalent in hydrocarbon resources 0.008 0.004 0.004

Oil refining, cubic meters/tonne of refined oil 0.000 0.000 0.037

Oil product supply, cubic meters/tonne of oil products sold 0.004 0.003 0.002

Transportation, cubic meters/tonne of oil, oil products transported 0.008 0.009 0.008

Notes. (1) No insufficiently treated water is discharged into water bodies by petrochemical and power generating entities. (2) Specific discharges of insufficiently treated wastewater by oil refining entities are calculated based on the volume of production wastewater from LUKOIL- Ukhtaneftepererabotka, excluding any utility wastewater received from MUE Ukhtavodokanal.

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Gross emissions of pollutants into the atmosphere (net of CO2) by LUKOIL Group entities, EMISSIONS thousand tonnes

Oil and gas production companies Key initiatives of the Environmental Safety Gross emissions from LUKOIL Group 2018 2019 in Russia account for the biggest Program aimed at reducing pollutant entities decreased in 2019 by 6.9% share of air pollutant emissions across emissions include: (within the boundaries for 2018). Total emissions LUKOIL Group (over 75%), mainly Within the boundaries for 2018 451.3 420.3 due to APG flaring, along with power • replacement or upgrade In 2019, there was a significant decline Within the boundaries for 2019, including: – 428.7 generating entities burning fuel for power of equipment, application of the best in hydrocarbon emissions across • ISAB NA 8.3 and heat generation. available technology at production LUKOIL Group within the boundaries • Foreign oil product supply entities1 NA 0.1 sites; for 2018 (by 17.6% compared • application of emission capture to 2018), chiefly driven by changes including by pollutant type:

and treatment systems; in the calculation of maximum allowable NOx emissions • upgrade and construction of new emissions from oil and gas companies Within the boundaries for 2018 49.4 47.3 generation capacities in power in Russia. It was taken into account that Within the boundaries for 2019, including: – 49.6 generating entities with improved a significant part of oil and oil product • ISAB NA 2.3 automated systems for regulating storage tanks operated without significant • Foreign oil product supply entities NA NA combustion processes, heat losses changes in the liquid level, thus SO emissions and minimization of pollutant minimizing the “breathing” of tanks1. 2 Within the boundaries for 2018 37.5 35.6 emissions. In addition, emissions Within the boundaries for 2019, including: 40.8 of sulfur dioxide by Russian oil • ISAB NA 5.2 and gas production entities dropped • Foreign oil product supply entities NA NA by 24,6% due to the commissioning solid particle discharges of the gas section of an oil treatment Within the boundaries for 2018 14.9 15.0 facility at the Vostochno-Lambeyshorskoye Within the boundaries for 2019, including: – 15.1 field at LUKOIL-Komi in 2018. The field • ISAB NA 0.1 is characterized by high hydrogen sulfide • Foreign oil product supply entities NA 0.0 content in formation products. СО emissions Within the boundaries for 2018 155.9 153.9 Within the boundaries for 2019, including: – 154.6 • ISAB NA 0.7 • Foreign oil product supply entities NA NA hydrocarbon emissions Within the boundaries for 2018 73.9 60.9 Within the boundaries for 2019, including: – 60.9 • ISAB NA 0.0 • Foreign oil product supply entities NA 0.0 volatile organic compounds (VOC) Within the boundaries for 2018 115.5 105.9 Within the boundaries for 2019, including: – 105.9 • ISAB NA 0.0 • Foreign oil product supply entities NA NA emissions of other pollutants Within the boundaries for 2018 4.2 1.7 Within the boundaries for 2019, including: – 1.7 • ISAB NA 0.0 • Foreign oil product supply entities NA NA

Note. Data on LUKOIL Group are published in the Report starting from calendar year 2018 (reporting year).

1 “Breathing” of tanks means pressure fluctuations inside tanks for oil and oil product storage associated with the inflow or flow of liquid inside the tank (“large breathing”) or change in the ambient temperature (“small breathing”). Changes in pressure inside the tanks affect the volume of vapor emissions of petroleum products. 1 The data for 2019 represent the sum of data by pollutant types, each with a value less than 0.05.

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Gross air emissions (excluding СО ) LUKOIL Group Russian organizations, thousand tonnes 2 WASTE

2017 2018 2019 IN 2019, THE COMPANY ENSURED Our main approach to industrial waste management Total emissions, including: 502.5 433.3 402.3 lies in applying the most advanced technologies, COMPLIANCE WITH THE WASTE MANAGEMENT • emissions NОx 49.6 47.1 46.2 preventing excessive build-ups of waste KPI FOR RUSSIAN ENTITIES AS THE VOLUME at LUKOIL Group entities’ facilities, and placing waste OF WASTE DISPOSED MATCHED THE VOLUME • emissions SO2 23.0 25.1 22.0 at specialized facilities that meet modern requirements. OF WASTE GENERATED1. THE AMOUNT OF PRE- • emissions of solid substances 24.3 14.7 14.9 Most production waste in Russia is made up of drilling PRIVATIZATION IN RUSSIAN ENTITIES WASTE • emissions СО 216.6 153.9 152.2 cuttings and waste drilling fluids, which are generated FELL during drilling and well operation. The volume of waste • hydrocarbon emissions (including VOC) 187.8 188.3 165.7 generated depends primarily on the scope of drilling • emissions of other pollutants 1.2 4.2 1.3 and repair works carried out at wells. BY 17%

Specific emissions of pollutants into the atmosphere by Russian entities of LUKOIL Group Waste management by LUKOIL Group, thousand tonnes 2017 2018 2019 2018 2019 Oil and gas extraction, kg/tonne of oil equivalent in extracted hydrocarbon resources 4.1 3.4 3.2 Waste at the beginning of the reporting year across LUKOIL Group

Oil refining, kg/tonne of refined oil 0.9 0.8 0.9 Within the boundaries for 2018 956 905

Petrochemicals, kg/tonne of processed raw materials 1.3 1.1 1.4 Within the boundaries for 2019, including: -- 910

Oil product supply, kg/tonne of oil products sold 0.8 0.8 0.7 • ISAB NA 5

Transportation, kg/tonne of oil, oil products transported 0.1 0.2 0.2 • Foreign oil product supply entities NA 0

Power generation, kg/tonne of oil equivalent in consumed fuel 2.6 2.9 2.9 Waste generation volume, total

Within the boundaries for 2018 1,556 1,747

Within the boundaries for 2019, including: --- 1,783

• ISAB NA 34

• Foreign oil product supply entities NA 2

Received from third parties

Total NA 5

Amount of waste used, neutralized, and transferred to specialized entities, as well as landfill waste

LUKOIL Group, including: NA 1,751

• ISAB NA 35

• Foreign oil product supply entities NA 2

Waste at the end of the reporting year

Within the boundaries for 2018 905 943

Within the boundaries for 2019, including: -- 947

• ISAB NA 4

• Foreign oil product supply entities NA 0

Note. Data on LUKOIL Group are published in the Report starting from calendar year 2018 (reporting year).

1 The calculation of the KPI does not take into account the volume of rock generated during shaft works at LUKOIL-Komi sites and placed at specialized waste dumps.

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Waste generation and waste management in Russian LUKOIL Group entities, thousand tonnes The Company applies pitless well- methods, the state of the in-process The new disposal facilities will facilitate drilling concept in vulnerable natural control system, and the availability improvements to waste management. 2017 2018 2019 areas in Russia, according to which of the necessary resources to fulfill In 2019, such facilities were built generated drilling waste is not stored/ contractual obligations. at the Pyakyakhinskoye field in Western Volume of Waste generated (excluding waste received from third parties) 1,434 1,529 1,671 landfilled at drill sites, but sent for use Siberia and at the Shchelyayurskoye or neutralization. In order to minimize environmental field in the Komi Republic; a thermal Volume of waste used, neutralized and transferred to specialized organizations, 1,396 1,582 1,642 impact from hazardous waste waste treatment plant was purchased as well as landfill waste We supervise the quality of waste generation, new waste disposal for the Stavrolen plant. disposal works carried out by contractors, facilities are being built by Lukoil Note. Data is provided without rock waste. monitoring their waste-handling and existing ones are being modernized.

Based on the respective environmental the share of oil-containing waste (oil Waste that is stored long term (596 hazard classification, most generated sludge generated as a result of cleaning thousand tonnes) still mainly includes PRE-PRIVATIZATION DAMAGE MANAGEMENT waste is of Class 4 (low-hazard) or Class 5 of equipment and oil spill sites, Hazard waste activated sludge, which was (non-hazardous), and is mostly disposed1. Classes 3 and 4) increased from 13% generated during the Saratovorgsintez By the time of the privatization Oil refinery in Romania with an agreement signed in 2000. to 18% compared to 2018 in the overall plant’s wastewater treatment and placed of a number of assets in the field Such works are financed by the state The share of hazardous waste (Hazard waste generation structure. This was due at the deposit site. The site is included of oil production and refining in Russia In 2006-2013, around 450 thousand in Bulgaria. . In 2019 18 thousand tonnes Classes 1 and 2) that contains substances to the fact that oil-contaminated soils, in the State Register of Waste Disposal and Eastern Europe, significant volumes cubic meters of pre-privatization oil waste of oil waste were disposed of. This work that are dangerous to human health which are largely washed at specialized Facilities. of oil-containing waste (oil sludge was disposed of. Contaminated soil was continues. and which can cause irreparable changes facilities in LUKOIL-Komi and previously in special sludge collectors cleaned and removed from the walls to environmental systems amounts were not considered waste, are recorded and evaporation ponds) had been and bottom of sludge collectors. to 0.01% of the total volume of generated as waste from 2019 following changes accumulated at production facilities. Reclamation was carried out at the site Russian refineries waste; such waste is subject to mandatory to the regional accounting methodology. They are called “pre-privatization of the former facility, grasses and shrubs disposal. environmental damages” in the Company. were sown. In 2019, work at the Volgograd refinery The slight increase in the volume LUKOIL, at its own expense, disposes continued to neutralize pre-privatization Hazard Class 3 (moderate) waste includes of waste as of the end of 2019 is due of them at most enterprises. As of 2019, oil waste, and 50 thousand tonnes were a portion of oil-containing waste (with to the drilling operations plan: some wells such waste had been fully processed Oil refinery in Bulgaria disposed of. It remains to process around an oil product content in excess of 15%) under construction accumulate drilling at the refinery in Romania, as well 39 thousand tonnes of waste. that is also subject to disposal. In 2019, waste for further disposal. as at LUKOIL-Western Siberia and RITEK The refinery undertook to remedy of pre- in Russia. privatization oil waste in accordance

1–5 hazard class waste at Russian entities of LUKOIL Group in 2019, thousand tonnes

Waste Waste generated Waste at the end at the beginning Pre-privatization waste, thousand tonnes during the year, total of the year, total of the year, total Waste Waste eliminated Waste at the end Total waste across LUKOIL Group 886 1,671 920 at the beginning in reporting year of reporting year of reporting year including: 2018 • oil-containing 22 294 20 LUKOIL Group entities, total, including: 773 107 666 • drilling waste 108 1,131 148 • Russian 319 50 269 Hazard Class 1 0.0008 0.0330 0.0020 • foreign 454 57 397 Hazard Class 2 0.0014 0.0937 0.0043 2019 Share of waste of Hazard Classes 1 and 2 0.0002% 0.0076% 0.0007% LUKOIL Group entities, total, including: 666 69 602* Hazard Class 3 (oil-containing) 23 253 21 • Russian 269 51 223* Share of waste of Hazard Classes 1, 2, and 3 3% 15% 2% • foreign 397 18 379 Hazard Class 4 831 1,287 868

Hazard Class 5 32 131 31 Note. (1)* In implementing the scheduled measures to eliminate pre-privatization damage at LUKOIL-Volgogradneftepererabotka for 2020, the scope of pre-privatization damage was revised as part of a geodesic survey at the end of 2019. Thus, the total pre-privatization damage was changed from 218 thousand tonnes to 223 thousand tonnes. (2) The amount of waste disposal during the pre-privatization period in foreign entities (in Bulgaria) Notes. Most substances categorized as hazardous waste in the international accounting system 1 Here and later, the term “disposal” is used is determined by the financing of the state, which is the owner of the waste in accordance with local legislation. are contained in waste of Hazard Classes 1 and 2. In Russia, waste of Hazard Classes 1–3 to mean “use, neutralization, landfilling, is considered hazardous, the Hazard Class 4 waste low-hazard, and Hazard Class 5 waste non- or handing over to a specialized organization hazardous. The hazard class is determined based on criteria approved by the Russian Ministry for these purposes.” of Natural Resources and Environment.

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BIODIVERSITY CONSERVATION

In view of the importance of biodiversity in World Heritage sites and IUCN we strive to balance any impacts Our goal is to preserve the diversity of natural Biodiversity conservation activities: conservation, especially in vulnerable (International Union for Conservation that our operations might have biosystems in the regions where the Company • rehabilitation of oil-contaminated land natural areas, the Company has of Nature) Protected Areas of categories and we implement a variety of projects operates and to ensure that they are treated undertaken not to conduct operations I–IV. At each stage of a project, and activities to preserve ecosystems. with due care, so that the ability to regenerate • “zero discharge” when working at offshore is not threatened. facilities • release of fish fry into rivers as a compensation MANAGEMENT OF BIODIVERSITY ISSUES for the impact on aquatic bioresources • building fish protection systems near HPPs ELEMENTS and installation of bird protection devices OF THE MANAGEMENT SYSTEM DESCRIPTION CORPORATE DOCUMENTS In 17 years of observation, there have been no significant on power lines impacts from activities of the Company’s facilities on the marine environment that would require response We seek to avoid conducting work LUKOIL Group’s HSE Policy • gardening and landscaping at production sites measures. COMMITMENTS in habitats of valuable and highly in the 21st Century approved by Resolution • clearing the channels of small rivers, including AND PRINCIPLES protected plant and animal species of PJSC LUKOIL Management Committee at underwater crossings of pipeline systems or to minimize such impact where dated 18 May 2018 it cannot be avoided • garbage collection activities in most regions Our principle is of operation “prevention – mitigation – restoration – compensation.”

LAND REMEDIATION • Assessment of the impact Corporate Standard STO LUKOIL 1.6.9- IMPACT of planned projects on biodiversity 2019 “Health, Safety and Environment The remediation of oil-contaminated ASSESSMENT is undertaken during Management System. Pre-project MECHANISMS the preparation of project and Project Documentation. Business land is carried out in all areas documents Case Preparation. General Requirements” of the Company’s operations. In 2019, • Environmental and satellite 2. Local laws of countries of operation. 56.6 hectares of land were handed monitoring is organized In Russia, this is performed voluntarily over to the State Commission (in by companies engaged in offshore 2018: 50.3 hectares), where all stages activities of rehabilitation had been completed; as a result, the content of oil products was reduced to the required level. A center has been set up to deal “Plan for Prevention and Remedy RESPONSE with the impact of emergencies of Animal Habitat Pollution with Oil The remediation comprises the following MECHANISMS on animals, birds and flora and Oil Products in the Event of a Spill stages: and to implement measures to rescue from LUKOIL-Nizhnevolzhskneft Facilities” • technical (collection of as many them in the Caspian Sea pollutants as possible from the surface, agro-technical manipulations, application of oil-oxidizing bio- preparations, loosening for better The Biodiversity Conservation The Program was approved by Order aeration) Program is in place for facilities of PJSC LUKOIL No. 136 dated 23 July 2015. PROGRAMS, • biological (sowing seeds or seedlings, operating in the Arctic zone of Russia. As a follow-up to this Program, action plans PROJECTS fertilizing). AND INITIATIVES We are guided by the Arctic Council’s on biodiversity conservation have been document “Guidelines for Oil developed for entities operating in the Arctic and Gas Companies on the Arctic region (LLC Varandey Terminal, If the terrain implies washing out Shelf” LLC LUKOIL-Komi, LLC LUKOIL-West Siberia). and further spreading of residual For entities operating in other regions, contamination, the contaminated layer biodiversity conservation measures form is removed and taken to specialized an integral part of the Environmental Safety Program. bioremediation sites, and clean soil is brought to the reclaimed site where biological remediation is carried out.

COLLABORATION Russia: joint projects with WWF Russia, Cooperation agreements nature reserves and specially protected areas

The results of environmental monitoring FURTHER INFORMATION have been published annually on the corporate website since 2003

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BIODIVERSITY BIODIVERSITY CONSERVATION PROGRAM IN UZBEKISTAN CONSERVATION

PROJECTS LUKOIL Uzbekistan Operating Company LLC operates in the Republic of Uzbekistan Ongoing ornithological monitoring is carried out under production sharing agreements with the participation of international experts: 40 observation for the Kandym group of fields, the Khauzak- points along the lake banks have been set up; permanent Shady and Kungrad, as well as for sites power transmission line routes and the Khoja-Davlet territory in the South-West Gissar and Ustyurt region. inspection have been determined. The monitoring process involves six stages throughout the year based on the biological Production facilities are located in the desert cycles of bird life. The developed methodology is coordinated zone and in foothill areas, in close proximity with the local State Biological Control Service of the State to a state ornithological reserve (Dengizkul Lake, Committee for Nature Protection of Uzbekistan1. The distribution, a water object on the Ramsar Convention list) characteristics and condition of bird habitats have been studied. and the Khoja-Davlet ornithological territory.

Over the seven years of LUKOIL operations in these territories, programs have been Bird protection devices are installed on power transmission lines, implemented to preserve the ecosystem of Lake their functioning, as well as the integrity of markers, information Dengizkul (initially, the action plan was developed boards and warning signs are checked. in 2012 and revised and updated in 2016) and the Khoja-Davlet territory (since 2016).

Educational activities are organized for staff and local residents SAIGA ANTELOPE ANIMAL AND BIRD (stalls are set up, information campaigns are held), and access to the territories adjacent to the production facilities is restricted CONSERVATION PROJECT REHABILITATION FACILITY to the staff and contractors. IN RUSSIA IN ASTRAKHAN

Work is carried out with contractors, bird habitat protection In 2019, LUKOIL became a member of the Working Group LUKOIL-Nizhnevolzhskneft is developing oil and gas requirements are included in contracts, briefings are held, of the Ministry of Natural Resources and Environment fields in the northern sector of the Caspian Sea. Despite and biodiversity conservation issues are discussed at workshops. of the Russian Federation for the implementation long-term human influence, the Caspian region still of the federal project “Conservation of Biological Diversity has one of the most valuable ecosystems in the world, and Development of Ecotourism.” and the marine environment and coastal areas exhibit high biodiversity. There are also valuable wetlands in the Volga The Company works with a local eco-center Jeyran where The Company initiated round tables on the conservation River delta in the northern Caspian Sea. animals in need of help are sent. of saiga, one of the oldest representatives of fauna. At the end of the events, a decision was made to launch In order to mitigate negative impacts on animals and birds a new project jointly with the Ministry. It will be executed in production areas, a rehabilitation facility for animals in the “Black Lands” nature reserve in the Republic affected by oil pollution was set up with LUKOIL support. Upon the completion of construction works, the biological of Kalmykia (which has the status of a world-class The facility is located in the delta of the Volga River rehabilitation of disturbed lands was performed at all sites, biosphere reserve) and the “Stepnoi” reserve at the production base of the Astrakhan Directorate and saxaul and perennial grasses planted. in the Astrakhan Region. of Specially Protected Areas. It has a mobile rescue station, a receiving and cleaning station for contaminated animals LUKOIL has a longstanding working relationship and birds, and enclosures for keeping them. Trained with these reserves, providing support as part employees of the facility take no more than three hours of the Competition for Social and Cultural Projects. to get to an animal or bird that needs help. In the opinions of ornithologists, Lake Dengizkul retains its importance Thanks to several grants, the level of poaching in Kalmykia as a habitat for rare species listed in the Red Book of the Republic has been reduced, in particular through educational Rescue operations are managed by the Animal Rescue of Uzbekistan, and an area where waterfowl rest during migration (over events for residents. Group, which is part of LUKOIL-Nizhnevolzhskneft 20 thousand birds)2. LUKOIL’s biodiversity conservation program in these Emergency Commission. Since its creation, the facility territories has helped mitigate the impact of production activities In 2020, a saiga conservation action plan has been used solely for training purposes, as no rescue on local fauna. The survey results are annually presented to stakeholders will be elaborated and incorporated in the Environmental operations have so far been required. and the State Committee for Nature Protection of Uzbekistan. Safety Program. A long-time partner of the Company - WWF-Russia - will join in the implementation of the plan.

1 In January 2019 the State Committee for Nature Protection of Uzbekistan was reorganized into the State Committee of the Republic of Uzbekistan on ecology and environmental protection. 2 Endangered species include the Dalmatin pelican, the stiff-tailed duck, the white-eyed pochard, the marbled duck, the velvet scoter, the pale harrier, the imperial eagle, the houbara bustard, the black-tailed godwit and curlew, the white pelican, the little cormorant, the little egret, the mute swan, 122 the spoonbill, the glory ibis, the flamingo, the steppe eagle, and the white-tailed eagle. 123 WWW.LUKOIL.COM

OUR EMPLOYEES

128 LEADERSHIP PHILOSOPHY 131 EMPLOYMENT AND DIVERSITY Q WHY DOES THE COMPANY SEE Q WHAT DIGITAL TECHNOLOGIES ARE BEING THE INTRODUCTION OF THE LEADERSHIP ALREADY USED IN HR MANAGEMENT, AND HOW PHILOSOPHY AS A KEY STEP, AND HOW DOES EFFECTIVE HAVE THEY BEEN IN THE CURRENT THIS APPROACH HELP ADAPT TO EXTERNAL SITUATION? 132 CHANGES? SOCIAL POLICY

A Today, the oil and gas sector is facing new challenges that can A Significant efforts have been taken to implement digital technologies, which Anatoly significantly change professional areas of activity and, therefore, makes it possible to rapidly and efficiently organize personnel management specifics of HR management and social work. activities in various conditions. In particular, this includes, when necessary, Moskalenko 135 providing remote access to corporate systems, and automated workplaces, In 2019 the Company launched a personnel performance which creates greater Company flexibility and mobility and accords TRAINING Vice President and efficiency management system, based on the principles with international best practices. AND DEVELOPMENT for Human Resources of modern leadership philosophy. This system introduces Management new approaches that reshape the role of staff in production In order to boost the efficiency of employees’ work and to encourage and Social Policy and management processes. We already have a number of project them to use the distance learning system, special courses are developed teams working in the Exploration and Production business and training events held to enhance industry-specific knowledge, of PJSC LUKOIL segment, and a digital environment is being created to facilitate and improve the knowledge of foreign languages and management skills. their coordinated activities. Once we have achieved sustained Thematic online trainings and webinars are regularly held on topical issues results in this regard, we will gradually roll out the approach across such as career building, negotiations, time management, motivation, other business segments. increasing psychological resilience, and stress management. The Corporate Knowledge Management System is developing actively, allowing employees from various regions to share best practices. The Company has information services offering necessary and beneficial information to employees. In addition, 2019 saw the development and deployment of AR LUKOIL, a mobile app facilitating training in an augmented reality mode and corporate competitions, where each Company employee can participate. WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

KEY CHANGES AND RESULTS MANAGEMENT SYSTEM IN THE REPORTING YEAR ELEMENTS CORPORATE OF THE MANAGEMENT SYSTEM DESCRIPTION DOCUMENTS OVER THE AVERAGE SALARY AT RUSSIAN ENTITIES The main task is to create The HR Policy of OJSC LUKOIL IN SIGNIFICANT REGIONS GOALS, THOUSAND a management system that will approved by Minutes No. 15 258 OF OPERATION WAS PRINCIPLES give the Company the stable of the Management Committee PERSON-COURSES status of “employer of choice” of OJSC LUKOIL on 19 May 2013 OF TRAINING WERE in the labor market. COMPLETED AT LEAST 1.5 TIMES HIGHER THAN THE AVERAGE SALARY IN THOSE REGIONS The main principles in the area The Code of Business Conduct PRIORITIES/ of employment relations are: and Ethics approved by Minutes CORPORATE • respect for human rights No. 17 of the Board of Directors • equal rights and opportunities of PJSC LUKOIL on 11 December STANDARDS for employees 2018 • compliance with statutory The Corporate Culture Rules approved EMPLOYEES WERE HIRED requirements by Minutes No. 31 of the Management KEY MANAGEMENT • respect for the culture Committee of OJSC LUKOIL on 27 PERSONNEL ARE BEING IN TWO NEW COUNTRIES: and customs of countries where December 2010 DEVELOPED MOROCCO AND NIGERIA we operate The Social Code of PJSC LUKOIL • cooperation with trade unions approved by Minutes No. and employees 16 of the Board of Directors of PJSC LUKOIL on 24 October 2017

KEY PERFORMANCE Labor productivity A set of KPIs approved by Minutes INDICATORS No. 26 of the Management Committee of PJSC LUKOIL on 14 CONTEXT December 2015

The main areas of social policy: Programs in all the areas have been According to International Labor Organization ones (lower incomes, no full employment guarantees, TARGETED • the remuneration and incentive approved reports1, the world of work is currently undergoing etc.). Therefore, an important task for employers PROGRAMS, system profound changes. Globalization and market liberalism is to help employees overcome the challenges inherent PROJECTS • training • social support in the late twentieth century, especially in the mining in transitioning to new work conditions. AND INITIATIVES industry, fostered favorable economic conditions • working with young and employment structures in many countries. However, The ILO Global Commission on the Future of Work has professionals and employees digitalization, changing demographics and climate created a human-centered agenda that highlights three change, and a transition to a green economy are altering main goals: increasing investment in people’s skills, the fundamentals of the labor market. The following strengthening labor guarantees and expanding social FURTHER trends have been cited as being the most important. dialogue, and increasing investment to ensure decent INFORMATION More details The Social Code and sustainable working conditions. LUKOIL supports are available of PJSC LUKOIL: Automation and robotics reduce the need for labor these objectives and has many programs to meet these on our corporate website: as production grows, and increase how selective goals. employers can be when it comes to the hiring and skill training of employees. As a result, various forms of part- time employment are becoming more widespread. This can have both positive consequences for employees (in the form of a better work-life balance) and negative

1. Sources: Work for a bighter future. The Global Commission on the Future of Work. Safety and Health at the Heart of the Future of Work. ILO, 2019.

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LEADERSHIP PHILOSOPHY PERSONNEL CHARACTERISTICS

The first quarter of the 21st century This will require changes in the system in the project personnel talent pool. Our saw major changes in the Company’s used to make decisions, people corporate knowledge system provides AS OF 31 DECEMBER 2019 LUKOIL GROUP There is no gender discrimination external and internal environment. management, training, motivation, for accumulation of project experience ENTITIES EMPLOYED OVER in the Company. Despite the specifics of the oil According to experts, the dominant and overall performance and efficiency and maintains a database of the lessons and gas industry and the traditional prevalence trends are economic and technological assessments. The new approach places learned from implemented projects. of men working in it, LUKOIL has maintained change, increased digitalization, a greater emphasis on the individual thousand people1, a balanced gender structure for many years. and changes in the workforce as the key driver behind achievement A new approach to the operation 105 When hiring employees, we provide equal structure. The internal environment of the Company’s strategic goals. Goal of the management succession system and the vast majority of employees worked opportunities to men and women: the structure is also evolving: generations management, effective and inspiring is also being elaborated. It is planned under permanent employment contracts and full- of newly hired employees in 2019 reflects a parity of employees are changing, new interaction between managers that career development opportunities time. The personnel structure has been stable of results in this area. skills and aptitudes are needed, and employees, constant feedback, will be provided to each employee in the past three years in terms of employee and younger workers are putting and a modern system of productivity and that the positive dynamics categories and age2. forward new ideas and inventions. and performance management facilitate of an employee’s digital productivity To ensure that the Company adapts high motivation and the attainment and performance rating will serve as one as much as possible to the new of personal and team results. All these of the main factors in career development. reality, we are making improvements factors determine the main changes being PERSONNEL GENDER to our corporate culture (values made to the management approach. A new corporate portal is being created, STRUCTURE IN 2019 and conduct), as well as to the system based on social networking principles. of relations in place between employer The first step has been to elaborate The portal provides a single information and employees. the corporate principles and approaches space for employees and simplifies Employee headcount for working with project personnel and speeds up communication in the Exploration and Production business and cooperation between project teams TOTAL segment. This group of employees and expert and interdisciplinary groups. ensures that effective solutions are found A transition to convenient services will 105,624 to engineering and technical problems, reduce the cost of routine operations 62,007 people 43,617 while achieving operational and investment and enable employees to tailor 59% 41% efficiency when implementing major their digital workplace to individual needs. people people LEADERSHIP and high-priority projects, both in Russia and abroad. Thanks to the project teams, The system of managing employee DEVELOPMENT BY CATEGORY the risk of making poorly grounded productivity and performance based (% of the category headcount) IS A KEY GLOBAL decisions is lowered, and Company’s on the new principles of modern HR TREND. and global experience and best practices leadership philosophy is reflected 3 are taken into account. in our single corporate portal, as well 74% MANAGERS 26% as analytics on key business performance The main achievement in 2019 was indicators for each LUKOIL Group 12,806 people to establish and improve the regulatory entity. Through integration, we facilitate The President of PJSC LUKOIL, framework for working with project personnel management and development 47% SPECIALISTS 53% Vagit Alekperov, has decided personnel. A unified approach to creating based on data collected for all types to begin implementing leadership project teams was established, of work performed by employees 28,691 people and engagement tools to facilitate a new planning system was developed, in a single information space. This a reliable and sustainable future and a set of competencies and a system in turn will make it possible to more 61% WORKERS AND OTHER PERSONNEL 39% for LUKOIL. Forward-looking of employee development, assessment, effectively develop each employee 64,127 people changes are designed to ensure that and remuneration (incentives) were and boost the efficiency of assessing the Company maintains its leading elaborated. Training programs their contribution to the achievement EMPLOYEES HIRED position in the industry. were developed for employees of strategic goals. 8,620 8,004 people % of the total number people 52% of hired employees 48%

Over half of all employees (around 60%) In 2019, the turnover rate of LUKOIL Group Product Supply in Russia business sector; are employed in the Refining, Marketing decreased by 0.3 p.p. compared to 2018. after 2018 the indicator began to decline and Distribution business segment For foreign entities the turnover rate (turnover rate was 6.6% in 2019). and more than a third (35.6%) work remains relatively stable for the period at exploration and production entities. between 2017 and 2019 (11.7% in 2019). 13.7% of employees work on a rotational In Russian entities some growth in 2018 basis. was due to the reorganization of the Oil

1. This indicator reflects employee headcount; the average headcount was over 101 thousand employees. 2. From this point onward the calculation is based on the number of employees as at 31 December in the reporting year (unless otherwise indicated). 3. The “Managers” category includes: CEO of a LUKOIL Group entity, Deputy Heads, Chief Engineer, Chief Accountant, Head of a branch, TPU, or another standalone business unit, other managers.

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CHARACTERISTICS OF PERSONNEL IN 2017-2019 EMPLOYMENT AND DIVERSITY

We endeavor to apply uniform culture throughout LUKOIL Group We provide equal career opportunities Breakdown of LUKOIL Group Breakdown of LUKOIL Group employees by age, % principles and approaches to working and to expand their capabilities for all employees. The Company regularly employees by category, % with our employees in all countries by gaining professional experience monitors gender diversity across various and regions where we operate, taking in international projects. categories of personnel. In 2019, into account local specifics and features. women held 26% of management The principles and standards set The Company has a pool of employees positions. The share of women holding forth in our HR policy and other local who can be rotated. Managers management positions at all levels regulations are mandatory for all and specialists with the necessary was 8% of the total number of female LUKOIL Group entities. experience and knowledge to be able employees. In addition, we respect to successfully implement projects the wishes of our employees to achieve In local labor markets LUKOIL provides are included in this pool and can be a work-life balance: for example, job opportunities for suitably qualified seconded to various LUKOIL Group in LUKOIL Group entities parental leave candidates, including for executive entities and projects to help achieve is granted to both women and men. positions. Our basic approach respective corporate goals. Thus We also encourage employee initiatives is to employ the best professionals, while the risk of a loss to efficiency is mitigated to set up groups according to their own Managers in foreign countries we strive to employ and the need for highly qualified interests; for example, there has been Specialists 2017 2018 2019 Workers and other personnel as many local professionals as possible, and managerial personnel is promptly a women’s club at the refinery in Nizhny and provide them with employee training satisfied, regardless of the situation Novgorod since 2013. Note. The breakdown of employees by category where necessary. on local labor markets. At the same did not change over the period from 2017 time, the opportunity to work in different to 2019. If personnel with the necessary business and cultural environments qualifications and capabilities is a motivation for employees who value are not available on local markets, Russian diversity. employees are appointed to managerial Breakdown of LUKOIL Group Breakdown of LUKOIL Group employees by type of activity, % positions to promote the same corporate employees by region, %

Oil and gas production Information about local managers in foreign LUKOIL Group entities Oil product supply, Transportation 2017 2018 2019 Power generation Senior managers, people 87 89 89 Oil refining and • including locals 28 28 29 petrochemicals Share of local senior managers, % 32 31 33 Europe Corporate and Other Asia Middle East and Africa North America Notes. (1) Senior managers include the CEO (Managing Director / General Director) and their deputies for functional areas. (2) Locals mean employees Russia that are permanently registered in or are citizens of foreign countries. (3) Data are given for significant regions. For a definition of significant regions see Appendix 7. Note. Data are based on the number Note. The Oil product supply, Transportation category also includes other organizations of employees as at 31 December 2019. from the Refining, Marketing and Distribution business segment.

Share of female managers in the total number of managers at corresponding level in LUKOIL Group entities, %

LUKOIL Group employee headcount and turnover Employee category 2019

2017 2018 2019 CEO of a LUKOIL Group entity 1.1 Deputy Heads, Chief Engineer, Chief Accountant 17.5

Headcount as at 31 December each year, people 107,405 105,991 105,624 Head of a branch, TPU, or another standalone business unit 4.5

Average headcount, people 103,647 102,508 101,374 Head of structure unit 26.3 Turnover rate, % 6.7 7.8 7.5

Number of new hires, people 20,101 26,358 16,624

Note. The formula for calculating the turnover rate is given in Appendix 7.

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SOCIAL POLICY WAGES AND SALARY

In Russia, the minimum subsistence In 2019 the minimum rate of pay We strive to maintain an attractive those of the laws of the Russian and employees can participate in these level is regulated by law, in significant regions of operation employee remuneration system Federation and international standards programs irrespective of whether they as is the minimum wage and how often in Russia was in line with or exceeded so as to facilitate social stability are set out in the Social Code of are employed full or part-time. it is paid. LUKOIL enters into voluntary the regional minimum wage. Minimum and to enhance the quality of life PJSC LUKOIL. Services under employee collective agreements governing rates of pay are the same for men IN 2019, of our employees and their families. social programs are provided minimum wage rates, bonuses, and women. THE AVERAGE SALARY Company obligations which supplement in both Russian and foreign entities, and other types of remuneration. Such contracts cover 96% of employees The initial salary at LUKOIL Group IN LUKOIL GROUP’S in the Group’s Russian entities. foreign entities is at least equal RUSSIAN ENTITIES to the minimum wage rate established IN SIGNIFICANT LUKOIL Group staff costs, RUB million Under an agreement between by the labor laws of a country where PJSC LUKOIL and trade unions, LUKOIL Group operates, collective REGIONS the minimum rate of pay is at least agreements, and/or local regulations. OF OPERATION WAS 2017 2018 2019 equal to the minimum subsistence level for the working population. Rates AT LEAST Total, including: 142,141 145,706 147,284 of pay depend on performed duties, • payroll 132,022 136,475 138,180 the complexity of work tasks and level of responsibility, and are established 1.5 TIMES • social benefits and payments, social support for employees 9,294 8,403 8,125 for each employee taking into account their education and practical HIGHER THAN • training 825 828 979 experience. THE AVERAGE SALARY IN THE SAME REGIONS. Note. For a definition of payroll see Appendix 7.

Scope of services provided under LUKOIL Group social programs Average salary in 2019 in Russia, RUB

Average salary at LUKOIL Group’s Average salary in the region Indicator 2017 2018 2019 Significant regions of operation entities in Russia (Jan–Dec 2019) Total for LUKOIL Group, including: 468,150 430,323 456,495 Astrakhan Region 63,877 35,792

• Health protection, services 325,711 286,746 322,795 Volgograd Region 74,919 32,737

• Social support for families with children, services 65,311 62,241 59,480 Kaliningrad Region 89,645 34,357 • Non-state pension coverage, people 12,453 12,263 12,115 Krasnodar Territory 61,633 36,155 • Support for pensioners, people 43,281 44,990 42,825 Nizhny Novgorod Region 82,664 35,692 • Other, services 21,394 24,083 19,280 Perm Territory 83,730 38,562 Specifically for Russian entities, including: 402,709 357,277 387,154 Komi Republic 112,556 53,162

• Health protection, services 276,063 229,781 267,830 Saratov Region 57,996 28,503 • Social support for families with children, services 61,461 58,664 55,308 Stavropol Territory 60,614 31,867 • Non-state pension coverage, people 5,795 6,363 6,345 Khanty-Mansi Autonomous Area – Yugra 114,185 74,525 • Support for pensioners, people 43,116 44,884 42,689

• Other, services 16,274 17,585 14,982

The employee incentive system collective agreements, and other their health, providing support to them Note. A service provided to an employee under a social programs constitutes the provision of various types of social assistance and support in Russian entities also includes local regulations. A significant part and their families, and offering them at the employee’s request in kind (e.g. vaccinations) or in cash, to pay for the service or to compensate for its cost. benefits and compensation established of benefits and compensations is geared housing assistance. Social support is also under an agreement between towards enhancing the quality of life provided to former employees who have the employer and the trade union, of our employees through maintaining retired from the Company.

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TRAINING AND DEVELOPMENT VOLUNTARY HEALTH HOUSING PROGRAM INSURANCE The housing program is implemented The Company also helps employees Developing human potential is a long- qualifications and competencies. Training Voluntary health insurance programs in accordance with the Basic Housing in this area by partial payment of interest term priority of the Company’s HR Policy. programs serve as a tool for improving cover over 90% of employees at Russian Policy of LUKOIL Group and is aimed on bank loans. In 2019, 1.4 thousand Our corporate training system is focused productivity, quality, and safety of labor entities. Employees can at their own at providing housing to production employees participated in the program. on the Company’s strategic plans and for minimizing risks associated expense widen the coverage of health personnel (coming from other regions and its need for employees with certain with uninformed actions of employees. insurance programs to meet their specific with a job offer and young professionals). needs.

PENSION BENEFITS TRAINING PROGRAMS

Russian entities finance a corporate- participation (up to 4% of employees’ Our training system deploys a wide defined pension plan that covers annual salary). JSC Non-State Pension range of tools and methods to train In order to further improve the system in place the majority of employees. One Fund Otkritie manages the pension employees, including full-time study for continuous corporate training, the Company plans to: type of plan is based on the number plan assets of LUKOIL Group entities at state educational institutions years of service to the Company, and makes pension payments. and private centers, corporate the salary level as of the end of 2003, professional development programs, and any awards received during Employees of foreign entities corporate internships and training Develop criteria for organizing employees into groups the entire period of employment. are provided pension benefits in line courses, etc. In addition, the Company 43.6 for training and development purposes The other type of pension plan with the laws of the country of operation THOUSAND uses corporate trainers and mentors. is calculated in proportion to the salary as well as the local regulations of entities. Both training and mentorship methods level. These plans are financed solely Some pension plans are financed solely EMPLOYEES are used when introducing new by LUKOIL Group entities. Also, by employers, while others are based management approaches, and also serve Ascertain the professional, technical, managerial, employees have an opportunity to make on contributions from both employees FROM THE GROUP’S to foster a good mutual relationship and behavioral requirements that are common to these pension savings with the Company’s and employers. RUSSIAN ENTITIES with employees. groups PARTICIPATE Employees can submit a training IN THE JOINT application to their line manager. After PENSION PROGRAM. approval under established procedures, Identify training and development needs the application is incorporated into the Personnel Training Plan.

Elaborate an integrated corporate training and development program for various groups of employees Pension benefits and pension plans

2017 2018 2019

Pension liabilities, LUKOIL Group, RUB million 10,367 8,910 12,544

Number of former employees receiving a corporate pension, in Russia, people 46,294 49,441 52,854 Employee training at LUKOIL Group entities Average non-state pension level in Russia, RUB 2,240 2,272 2,134

2017 2018 2019

Number of trained employees, people 70,183 74,684 78,026

Amount of training, person-courses 193,761 243,467 258,728

Average number of training hours per trained employee, hours NA NA 84

Average annual training costs per trained employee, RUB NA NA 12,548

Note. (1) The growth in training in 2018-2019 was due to the organization of mass training in civil defense and emergency protection and the implementation of corporate and compulsory training programs on occupational safety and information security. (2) The average number of training hours per trained employee = Total number of hours of training events held at Russian and foreign entities / Total number of employees that received training in the reporting year. Average annual training costs per trained employee = Total costs to train employees that received training in the reporting year / Total number of employees that received training in the reporting year.

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DISTANCE LEARNING POLICY ON WORKING WITH YOUNG PROFESSIONALS AND YOUNG EMPLOYEES

In 2019 our corporate Distance Learning The main goal of the DLS is to ensure Working with young employees and effective personal fulfillment. and conferences for young professionals System (DLS) marked its 15th year. that employees have the required level and professionals is an important These measures include internships are held annually. Councils of young Over these years, it has been transformed of knowledge. This goal is achieved component of the Company’s for students at LUKOIL Group entities professionals have been established from a service providing a number through training and communication, HR Policy. It represents a system and mentorship1, initiatives that to help young people adapt to working IN 2019, THE TOTAL of online courses into a comprehensive assessment, and testing. The DLS of measures aimed at recruiting facilitate the continuity of professional conditions. individualized learning system. Today, is used to achieve large-scale training young professionals and fostering experience, best manufacturing NUMBER OF TRAINING the DLS is an efficient and cost-effective objectives, to test employee knowledge the conditions and opportunities that traditions, and the corporate culture. HOURS USING DISTANCE training tool covering a wide range for compliance with corporate will allow them to achieve successful Research and technology competitions LEARNING PROGRAMS of employees and a variety of educational and statutory requirements, programs. and to develop professional WAS MORE THAN and managerial competencies, as well In 2019 employees of 59 entities as the personal effectiveness skills Indicators related to working with young employees and professionals, people of LUKOIL Group completed more of employees. MILLION. than 140 thousand person-courses 2 2017 2018 2019 in a distance learning format.

Number of young employees2 42,772 41,174 39,179

Share of young employees in total employee headcount, % 40% 39% 37%

MANAGEMENT TALENT POOL Number of young professionals 1,945 1,639 1,423

The Company is constantly updating To create the pool of executive • Identifying employees that Young employees recruited, including: 12,125 14,624 9,427 the reserve pool of talent, which consists candidates capable of taking up have high leadership potential, • young professionals 706 589 631 of the most experienced and promising leadership positions in the Company, and conducting a comprehensive employees. All workers of the Company management succession planning assessment of their skills; Number of students studying under agreements with LUKOIL Group entities 295 173 281 have equal opportunities to be credited is carried out. This process includes to the pool, provided that they perform the following steps: • Preparing tailored programs professional duties at the appropriate for employees, including structured Note. The decline in the total number of young employees aged under 35 and in the share of young employees in total headcount is due level systematically. An individual • Determining the qualities, training, internships, rotations, to employees exceeding the age threshold for the young employee category and an increase in the retirement age in Russia beginning in 2018. development plan is elaborated for each characteristics, and competencies assignments to special projects, employee included in the pool in order of future managers, based and mentoring by a senior to gain the necessary competencies. on the strategic needs employee (top manager). of the business;

COMPETENCY CENTERS

In accordance with Federal Law No. 238-FZ Based on the results of these exams, Also, in 2019 PJSC LUKOIL’s Working dated 3 July 2016 “On Independent tailored recommendations are elaborated Group on Development of the Corporate Appraisals of Competencies” and a related to prepare targeted training programs. Due System of Professional Competencies decision from the Company’s President, to the special training sites now established analyzed new and updated professional 1. in 2016 the Center for Assessment in the regions, the training of personnel has standards to ascertain whether The mentorship procedure is described of Competencies was established, become practice-oriented. their application was mandatory: in the Regulations on the Induction of New Employees at LUKOIL Group and in 2017 it was authorized to conduct 40 standards turned out to be mandatory Entities approved by a Resolution independent assessments by the Council In 2019, over 2 thousand people (and and 160 voluntary. Lists of respective of the Management Committee on Professional Competencies in the Oil more than 3 thousand in the space standards were sent to Russian of OJSC LUKOIL on 15 December 2008 and Gas Complex. The independent of two years) from production, refining, LUKOIL Group entities for future reference. (Minutes No. 33). The Regulations establish the procedure for organizing and holding assessment of employee capabilities and distribution organizations took part induction events for new employees is carried out for key professions in such assessments. The assessment at LUKOIL Group entities. and positions. Professional exams covered the following professions: oil 2. Young employees are employees of PJSC are administered by qualified experts who and gas production operators, process LUKOIL and LUKOIL Group entities under 35 confirm the professional level of employees unit operators, and commercial operators1. years of age, including young professionals. Young professionals are employees aged or identify gaps in their knowledge, skills, In September 2019, the Company began under 30 who have a higher or secondary and capabilities, including in the area to assess the capabilities of specialists vocational education and who began of industrial and occupational safety. in oil and gas refinery processing, working at the Company in positions related the maintenance and repair of refinery to their education, including in manual jobs, within six months after graduation or within equipment, and field geology. three months after completion of military service in the Armed Forces of the Russian 1. In addition to LUKOIL Group’s employees, in 2019 two candidates from external organizations took part in the assessment. Federation.

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SOCIETY

141 PRODUCT QUALITY AND CUSTOMER RELATIONS

Q HOW DO THE REGIONS BENEFIT Q TO WHAT EXTENT IS THIS 144 EXTERNAL SOCIAL FROM THE COMPANY’S SOCIAL APPROACH IN LINE WITH GLOBAL POLICY PRIORITIES PROGRAMS? TRENDS AND THE EXPECTATIONS OF STAKEHOLDERS, INCLUDING ABROAD?

A The key priority of our external social policy is to help people A Our Company demonstrates a high level of corporate social 152 and to improve the living standards in the cities where we operate. responsibility in all the regions where we operate globally. SUPPORTING In order to make our social investments as effective as possible, We feel that requirements for companies are currently growing, INDIGENOUS and demands from society increasingly concern not so much we coordinate efforts with residents and regional leaders, MINORITIES combining our plans with the tasks of regional policies. This is how isolated, one-time actions, but rather complex policies aimed OF THE NORTH Gleb Ovsyannikov new infrastructure facilities are created, which will shape cities at achieving specific results. We need to try to take into account Head of Public of the future. how things might develop over several decades. This is exactly the approach enshrined in the principles of sustainable Relations Department For example, in 2019 it was decided to open a branch of the Perm development being adopted by all major companies. of PJSC LUKOIL National Research Polytechnic University in Kogalym (Western Siberia). So far, thanks to LUKOIL’s support, a branch of the Maly An external social policy is an important part of our sustainable Theater has been opened in the city, new educational institutions development activities and is implemented taking into are up and running, and a sports training center will be built. account the global challenges the Company faces. We actively Thus, this oil mono-city is gradually becoming a cultural, scientific, cooperate with stakeholders working at the United Nations, and educational center within the Khanty-Mansi Autonomous European Parliament and European Commission platforms, Area – Yugra that is attractive to tourists. We believe that such and we participate in industry and environmental associations changes are fully in line with the sustainable development and engage with well-known non-profit organizations. objectives of the regions. We discuss at international level a range of topical issues related to climate change; the condition of the environment, seas, and oceans; health care; and support for indigenous peoples. LUKOIL will continue to seek to make progress in all these areas while at the same time maintaining a responsible approach to business. WWW.LUKOIL.COM ABOUT CORPORATE CLIMATE SAFETY ENVIRONMENTAL OUR SOCIETY THE COMPANY GOVERNANCE CHANGE PROTECTION EMPLOYEES

PRODUCT QUALITY AND CUSTOMER RELATIONS

KEY CHANGES AND RESULTS LUKOIL Group entities produce a wide developing and launching new efforts to get feedback from our clients IN THE REPORTING YEAR range of products for various industries products with enhanced operational on the quality of our products and related and vehicle owners in Russia, Europe, and environmental properties, services. LUKOIL filling stations have Asia, and the Americas. Our priorities and continually improving quality a loyalty program for customers. are focusing on customer expectations, management approaches. We make great LARGER SALES OF PRODUCTS GREATER LEVELS WITH IMPROVED OF CUSTOMER ENVIRONMENTAL SATISFACTION Sales of fuel products and lubricants CHARACTERISTICS

Type of product 2017 2018 2019

ECTO brand fuel, thousand tonnes 8,554 9,603 9,022

Bunker fuel, thousand tonnes 4,539 4,742 4,269 TOTAL EXTERNAL SOCIAL OVER SUPPORT EXPENSES Aviation bunker fuel, thousand tonnes 3,238 3,198 3,357 AMOUNTED TO Branded oils (premium group), thousand tonnes 270 258 254 190 VOLUNTEER EVENTS Biofuel blends*, million liters 4,174 6,515 7,093 RUB 9.2 BILLION HELD BY LUKOIL YOUNG SPECIALISTS Note. *Allowing for a motor gasoline density of 0.755 kg/L and a diesel fuel density of 0.845 kg/L. Biofuel blends are blends of motor gasolines and ethanol (up to 10%) or diesel fuel and fatty acid methyl esters. These products are sold in European countries (the largest volumes, in excess of 1,000 million liters, are sold in Belgium, Romania, Bulgaria, and Turkey).

MANUFACTURING AND SELLING PRODUCTS WITH ENHANCED PROPERTIES

LUKOIL-branded products have gases. The use of new and innovative CONTEXT enhanced properties that enable lower products fosters improvements in safety fuel consumption and reduce the content and reduces negative environmental of hazardous substances in exhaust impacts on the customer side.

Meeting challenges at the level of the population, increased of cities and small communities migration processes, digitalization, Share of products with enhanced properties, % is an important aspect of achieving climate change, and growing the UN Sustainable Development urbanization. Goals. Communities have 2018 2019 different priorities, depending The challenges that need Share of ECTO branded fuels (motor gasoline and diesel) in total retail sales on their specific circumstances; to be addressed at the local level of petroleum products in Russia and abroad 63 64 some pay greater attention are complex. Promising strategies to environmental protection, in this regard include raising Share of environmentally safe marine fuel in total sales of bunker fuel 23 23 while others are more interested living standards while at the same Share of energy efficient lubricants1 in total production of lubricants in addressing social issues. time reducing the environmental (PVL + CVL)* 8 10 footprint, improving municipal Experts have identified1 several administration and land-use Source: OECD Roundtable Note. *The method of calculating the indicator (PVL+CVL) has been revised: only branded oils with a viscosity grade of less than or equal to XXW-30 ‘megatrends’ that will affect planning, solving the garbage on Cities and Regions are taken into account; 2018 data has been updated. the future of cities and territories, disposal problem, and develop for the Sustainable Development including rising average age green infrastructure. Goals, 2019

1. Oils with low high-temperature viscosity values (less than or equal to XXW-30) from light and heavy-duty product lines.

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PRODUCTION OF ENERGY EFFICIENT LUBRICANTS Ensuring the quality of oils RELATIONS WITH FILLING STATION CUSTOMERS and lubricants Our priority in developing production We also produce environmentally We maintain constant contact interest in the new program and were of oils and lubricants is to create innovative friendly oils. Biodegradable products Audits of LUKOIL production sites with the retail customers enthusiastic about participating LUKOIL’s strategic products for promising new types under the BIO brand (BIOLUBE, by customers which are leading car of our filling stations and analyze in it. To maintain the quality of services focus is on continuously of equipment and machinery, as well BIOCHAIN, and BIOFLUIDE) are supplied manufacturers (Daimler, General Motors, feedback from them in order to improve at the time of the program launch, seeking opportunities as highly effective specialized products to the European market. Over time these Ford, Volkswagen, Renault-Nissan- the quality of services as well additional operators were hired to enhance the quality of its for various industry sectors. oils degrade into components that, unlike Mitsubishi, etc.) are an effective quality as the satisfaction level with our products (new employees were trained prior motor fuels and lubricants the case with synthetic oils, do not harm control method and customer relations and services. The main methods to its launch), a new call center site was and adopting an approach LLK-International develops and supplies the environment. tool for LLK-International, as it is during of customer interaction are surveys opened, and information materials were of anticipatory compliance low-viscosity Genesis FE (Fuel Economy) such audits that product quality and analyses of client requests prepared. with the requirements oils to consumers in various countries. and production efficiency are evaluated. and proposals received via the Unified of the markets where These oils help reduce fuel consumption Hotline directly at filling stations An analysis of calls our products are sold. by internal combustion engines and boost We impose similar requirements and through social networks. from clients to the Unified Hotline The composition energy efficiency. on suppliers of raw materials, additives, LLC LICARD’s Big Data analytics tools in 2019 demonstrated greater of our motor fuels and supplementary materials. All facilitate customer segmentation, which satisfaction with fuel quality was 100% compliant suppliers are assessed against in turn facilitates more accurate feedback. and that issues previously cited with Euro 5 (European the applicable corporate standard1, by clients as problematic had also been emission standard 5) as early QUALITY MANAGEMENT and LUKOIL Group entities perform Feedback is used to improve the work successfully resolved. as 2012. As part of continued audits of suppliers. of regional managers at filling stations: work to improve fuel quality, The Company adopts an integrated to and from Transneft and Russian Railways every month their performance Thanks to systematization and new LUKOIL has launched the ECTO and ECTO+ fuel approach to quality management transportation systems, and to ensure By 2022 LLK-International is benchmarked against criteria that take channels of communication with clients brands (motor gasoline at all stages of the product life cycle, their proper acceptance, storage, and sale plans to upgrade its capacities into account requests and complaints about advertising campaigns, and diesel fuel). from production to consumer. We apply at LUKOIL bulk plants and fuel stations. at principal sites in Perm and Volgograd received via a Unified Hotline, as well the number of informational requests The combustion products unified quality management approaches in order to accelerate a transition as the rating received in the Mobile related to promotions terms saw of these new types of fuel both in Russia and abroad. Our corporate automated management to manufacturing small-tonnage batches, Application. an almost fourfold decrease. To boost contain less sulfur, soot, system, which covers all filling stations which will reduce the resource intensity the effectiveness of information carcinogens, and other The quality management systems of nine and most bulk plants in Russia of production processes. After the launch of the new “Fill up campaigns, regional segmentation hazardous substances. entities operating in the aircraft bunkering and is installed at facilities in Serbia with profit” loyalty program in 2019, has been tested since 2019: clients The Company also produces sector in Russia and abroad, as well as all and Romania, allows oil product flows to be Customer relations are covered the number of calls from individual in a specific region receive messages innovative products LLK-International facilities producing oils electronically tracked from refinery to end by the SP LLK 08-2015 standard clients to the Unified Hotline rose about campaigns launched in relevant for marine shipping, aviation, and liquid lubricants, are certified under user. The Guaranteed Oil Product Delivery “The Procedure for Handling by 30%, due mainly to requests territories. Work is carried out and industrial companies. ISO 001:2015 with respective certificates. system reduces product transportation time, Customer Claims and Complaints.” to update personal data. This means with specific groups of clients to resolve LUKOIL is one as well as the number of improper uses Customers are sent Product Satisfaction that customers demonstrated significant local issues. of the largest suppliers and product losses incidents. The electronic Questionnaires three times a year of bunker fuel Ensuring the quality of motor fuels sealing of road tankers helps reduce in order to gauge their satisfaction levels. in Russia and for ports the rate of injuries among filling station The average consumer satisfaction in Bulgaria and Romania. Our goal is to perform comprehensive personnel, as it eliminates dangerous work level is defined as the ratio of positive Environmentally safe and real-time monitoring of the delivery at heights. responses in questionnaires to the total marine fuel (RMD-80/ and acceptance of oil products, both number of completed questionnaires. TSE) with 0.1% sulfur IN 2019 THE NUMBER OF COMPLAINTS content meets MARPOL1 requirements related ABOUT THE QUALITY OF OIL PRODUCTS AT FILLING to the content of air Average satisfaction level of oil STATIONS DROPPED BY ALMOST 30% COMPARED pollutants in exhaust gas and lubricant consumers, % in SECAs2 and aquatic areas Distribution of LUKOIL Group filling stations among countries, of those satisfied with product TO 2017, AND THE NUMBER OF COMPLAINTS of the European Union. as of December 31 each year quality ABOUT THE ABSENCE OF OIL PRODUCTS FELL This product has been sold in the Baltic Sea aquatic area 70%. THERE WAS A 3.5 TIME INCREASE IN POSITIVE since 2014. 2017 2018 2019 FEEDBACK FROM CLIENTS ON THE WORK OF FILLING Total 5,258 5,168 5,044 STATION OPERATORS. 2018 Russia 2,609 2,556 2,469 2017 Abroad 2,649 2,612 2,575 The customer relations system we have Note. Data include LUKOIL Group’s owned, leased, and franchised filling stations, as well as suspended developed helps us boost overall operational and leased filling stations (as of 31 December 2019). Changes in the performance dynamics of Russian 1. The 1973 International Convention efficiency and create a welcoming environment companies supplying oil products are mainly due to a reorganization of the sales network in 2018–2019. for the Prevention of Pollution at filling stations. from Ships, as modified in 1978, Customer service unit answers clients’ questions via MARPOL 73/78. 1. 2. Sulfur emission control areas SP LLK 11-2016 “Procedure for Assessing any convenient communication channel (SECA) are aquatic areas Suppliers of Materials and Services.” in the North and Baltic Seas and part of the US coast.

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EXTERNAL SOCIAL POLICY PRIORITIES IN 2019 LUKOIL GROUP EXTERNAL SOCIAL SUPPORT EXPENSES AMOUNTED TO EXTERNAL SOCIAL PROGRAM MANAGEMENT SYSTEM

ADDITIONAL ELEMENTS CORPORATE INFORMATION RUB BILLION, OF THE MANAGEMENT SYSTEM DESCRIPTION DOCUMENTS 9.2 INCLUDING CHARITY SOCIAL PROJECTS AND EVENTS UNDER 31 COOPERATION The Company’s social responsibility principles The Social Code are defined as follows: of PJSC LUKOIL, AGREEMENTS WITH CONSTITUENT ENTITIES The Social Code of PJSC LUKOIL: • continuity of business; approved OF THE RUSSIAN FEDERATION. PRINCIPLES • economic feasibility; by the PJSC LUKOIL • and control over performance of obligations Board of Directors, and public reporting. Minutes dated 24 October 2017 The Company’s charity and sponsorship priorities and the mechanisms for their implementation We recognize the importance term in nature, and financed both and assessment have also been established. of regularly interacting with the residents by the LUKOIL Charity Fund (hereinafter, of the Russian regions where LUKOIL the LUKOIL CF or the Fund) and directly entities operate. Our external social policy by LUKOIL Group entities. Environmental protection, the development The Social Code focuses on the interests of territories PRIORITIES of science and education, the preservation of PJSC LUKOIL, and local communities, and is based The most well-known branded of national and cultural identities, and sponsoring clauses 3.1 – 3.7. The LUKOIL Charity Fund culture and sports and supporting socially Non-Profit Organization: on the principles of constructive program is the Social and Cultural vulnerable groups. cooperation and responsible partnership. Projects Competition, held by the LUKOIL CF in partnership In Russia we implement joint projects with LUKOIL Group entities. In 2019 with local authorities and social the competition was held abroad GLOBAL PRACTICE When developing our social programs we take into account the principles organizations to build and renovate for the first time in Romania. The decision of the United Nations Global Compact. kindergartens, schools, sports facilities, to expand the competition boundaries medical centers, hospitals, cultural was made in response to requests institutions, and other socially significant from local residents during dialogue PJSC LUKOIL’s external social policy is executed PJSC LUKOIL’s Policy facilities. sessions. The Company has held using the following mechanisms: on Interactions dialogue sessions in the cities of Prahov • social and economic cooperation agreements with Subsidiaries Our social priorities have remained and Bucharest in Romania twice a year INTERACTION with constituent entities of the Russian on Key Lines unchanged for over a quarter of a century, over the past few years. Federation; of Activities The Social and Cultural and are the same for all the regions WITH THE REGIONS Projects Competition: WHERE WE OPERATE • an annual Social and Cultural Projects of the Public and countries where LUKOIL Group Our corporate programs are generally competition held for public and municipal Relations Department entities operate. Many programs targeted and build on regional expertise AND WITH LOCAL organizations approved and regional projects are long and human potential. COMMUNITIES • charity projects and programs, targeted by the Management support Committee • supporting the indigenous minorities of PJSC LUKOIL, of the North Minutes dated • corporate volunteering 23 December • sponsorships. 2019 (clauses In 2019 PJSC LUKOIL won the IPRA Golden World Awards for Excellence 4.1.14 – 4.1.20). in two categories: Best Campaign for Community Engagement and Best Campaign for Promoting Travel and Tourism, for its projects to develop Kogalym as a tourism center in the West Siberian oil Our partner in the “More than and gas producing region. The main criterion for selecting projects we support is their potential Just a Purchase” program contribution to resolving local issues. is the “Our Future” foundation ASSESSMENT LUKOIL was also declared one of the winners in a contest for the best Our methods of assessing the efficacy of implemented projects include: of regional social programs: socially responsible oil and gas company of 2019, and received diplomas OF PROJECTS • meetings with regional administrations to discuss the effective for promoting charity activities among citizens and organizations. implementation of cooperation agreements • regular monitoring of the social and economic situation in Russian regions • meetings with residents of Russian regions (roundtables, dialogue sessions, conferences).

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AREAS OF SUPPORT

SELECTED SOCIAL POLICY INITIATIVES SELECTED SOCIAL POLICY INITIATIVES

Supporting social groups in need of help In 2019 PJSC LUKOIL opened an interactive training and methodological center SUPPORT FOR ORPHANED EDUCATIONAL in the historical hall No. 25, Oil, at the Exhibition of Achievements of the National CHILDREN, DISABLED A program to sponsor specialized libraries for blind children PROGRAMS Economy in Moscow (VDNKh). This is the largest multimedia exhibition in Russia PERSONS, WAR AND LABOR was continued: such libraries in six regions of Russia received devoted to scientific and applied topics, and it depicts the entire production computer equipment, software, and devices for reading audio We believe that our programs cycle – from hydrocarbon production to refining and sales operations. VETERANS, AND OTHER books. for the younger generation GROUPS IN NEED OF HELP and young oil industry This exhibition has been prepared with the help of the most advanced In 2019 a new program for children with cerebral palsy specialists will make a valuable technological solutions at the intersection of the digital and physical world, We support public institutions that look after was launched to provide them with wheelchairs tailored contribution to the future well- such as virtual and augmented reality, and holographic theater. The role of oil orphaned and abandoned children, as well to their bodies and functional needs. With increased mobility, being of society. in human life is shown through the synchronization of the subject, graphical, as the children themselves. Our programs their lives will become more active and interesting. and multimedia content and is presented through 150 stories. The Oil Pavilion promote the personal development of children, The Company supports oil is popular with a wide range of visitors, including children interested in science improve their health, and help them socialize industry higher and secondary and technology, students, and experts in this area. The Oil City playground and adapt to adult life. By supporting disabled educational institutions: high- is situated near the Pavilion, featuring play areas called Offshore Oil Production people, we not only provide them with financial quality research and modern Platform, Oil Refinery, Fuel Truck, and Racing Car and has various sports assistance, but also help them master new life facilities and resources help equipment installed in it. skills. them organize the educational process in accordance Traditional educational support programs continued in 2019. Since 2000 The Company provides special concern with the highest standards. we have been sponsoring high-potential students, young teachers, and job and caring to World War II veterans working The institutions use financial training instructors by providing individual scholarships and grants. In 2019 in the oil industry. Every year, on the eve support from the Company the scholarship program covered 14 higher education institutions and three of Victory Day, they receive monetary aid to create research centers, colleges, and the grant program covered one high school, eight higher and gifts. The Company also supports laboratories, and academic education institutions, and four colleges in Russia. the families of military servicemen who died departments; purchase in local conflicts. equipment; and publish new LUKOIL Group entities also support educational initiatives in regions where they textbooks and collections operate and implement programs that have wide coverage. of articles about the oil and gas industry.

Sponsorship programs for students and teachers of higher and secondary education organizations in Russia

2017 2018 2019

Student scholarships More details can be found SELECTED SOCIAL POLICY INITIATIVES on our corporate website: Number of scholarship holders, people 180 190 195

Level of financing, RUB million 6.6 5.9 6.2 Environmental campaigns have been held at LUKOIL Group Grants to teachers ENVIRONMENTAL entities throughout the Company’s existence and are a part PROJECTS of our corporate culture that is much loved by employees. Number of teachers, people 89 79 79 As part of these events our employees and partners traditionally plant trees and flowers and clear litter from urban and natural Financing amount, RUB million 10.3 9.0 9.2 areas, river banks, and rivers.

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SELECTED SOCIAL POLICY INITIATIVES SELECTED SOCIAL POLICY INITIATIVES

SUPPORTING The Company continued to run the Medical Force campaign to purchase SOCIAL The Social and Cultural Projects Competition has been held at LUKOIL Group HEALTHCARE medical equipment for district hospitals in the Perm Territory. This initiative AND CULTURAL entities, including in cooperation with the LUKOIL CF, since 2002. Its main goal has been running for more than five years. is to support initiatives from local citizens and entities to help resolve issues INSTITUTIONS PROJECTS that impact local areas, and to facilitate conditions that will increase the number In Uzbekistan we helped local organizations purchase equipment COMPETITION of active citizens capable of implementing worthwhile social ideas. The Company has for many years and specialized vehicles: an ambulance was provided to the Bukhara branch supported a number of large of the Soglom Avlod Uchun medical fund and the Bukhara Emergency specialized medical centers Medical Care Center received an oxygen station. The Children’s National and regional hospitals, out-patient Oncology Hospital received charitable support to repair and equip clinics, and first aid stations, as well the surgery department. as improving medical services in the regions of operation. SELECTED SOCIAL POLICY INITIATIVES

SUPPORTING Thanks to the Company’s support efforts, Russian car racers (Lukoil Racing Team), SPORTS TEAMS FC Spartak, the national skiing team, United Basketball League athletes, and numerous regional teams have recorded impressive victories in various sports. AND EVENTS All professional clubs supported by LUKOIL develop children sports.

SELECTED SOCIAL POLICY INITIATIVES LUKOIL’s sports program is geared towards In addition, the Company supports the development of youth soccer promoting healthy lifestyles at the international level and sports. We help both professional and amateur Lukoil Cup: Children’s The Company is committed to fostering conditions that preserve national teams and are constantly Soccer League: CULTURAL HERITAGE and cultural traditions and crafts in regions of operation, and supports in search of new ideas PRESERVATION various types of art, especially classical, as well as the territories where cultural to implement social initiatives monuments are located, including those representing valuable or particularly in this area. The consistent nature PROGRAM vulnerable cultural heritage sites. Numerous projects to preserve cultural of our approach is demonstrated This program is aimed at developing heritage have been implemented. by our continuous support Attention is also paid to sports veterans – LUKOIL is a founder of the Russian Russian culture, promoting of sports organizations (clubs, Olympians Foundation. spirituality, and preserving national 2019 was the Year of Theater in Russia. During the year a new stage federations, leagues, etc.) values. For many years we have of the Moscow Maly Theater was opened, in Kogalym. The former cultural through the LUKOIL Sport Club. The initiatives of the LUKOIL Sport Club are intended for young athletes, amateur supported museums, theaters, and leisure complex was redeveloped and converted into a modern cultural and professional athletes, and disabled people. performance groups, and festivals. site that can be used for a range of theatrical performances. A small theater We support the following We take part in organizing company was set up comprising graduates of the Shchepkin Higher Theater sports: soccer, motor racing, “Refueling through Sport” grant. This nationwide charity project is aimed exhibitions and concert tours, School. It will be permanently located in Kogalym and work as a branch basketball, competitive skiing, at sponsoring athletes aged between six and fourteen. In addition to cash prizes, restoring cultural heritage sites, of the Maly Theater. This is the first such collaboration between a Moscow water polo, handball, etc. winners receive sportswear and train under the guidance of Olympic champions. and repairing cultural and art theater and a Russian region. Each year 10 to 15 winners are selected. centers in Russian regions. The Company has traditionally supported a large number of cultural events: “Refueling through Sport” night race. More details about the activities the Perm State Art Gallery hosted a traveling exhibition entitled “Masterpieces In 2019 this charity race was held of LUKOIL Sport Club can be of the Kremlin,” Workshops, showcasing Moscow Kremlin Museums; for the second time, as part of the Formula found here: the Russian Museum put on “Angels of the 20th Century” exhibition; One Russian Grand Prix. Participants had the Vyatka Art Museum named after V.M. and A.M. Vasnetsov held the “Time the opportunity to run on the race track when Space” exhibition; and the Astrakhan Art Gallery named after P.M. Dogadin Russia hosted the stage of the competition. put on “The City of the Sun” exhibition using exhibits from the ROSIZO State Around one thousand runners took part, Museum and Exhibition Center. Also, the Company supported the restoration twice as many as in 2018. The funds raised of paintings of well-known Russian artists in Moscow and regional museums, were partially used to support Russia’s and in addition to the above-mentioned projects, the Company also youngest racer, Rodion Dyadya. supported cultural centers and performance groups in various towns and villages across Russia.

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SOCIAL AND CULTURAL PROJECTS COMPETITION CORPORATE VOLUNTEERING

The practice of volunteering in campaigns • Support for war and oil industry • Sporting events – bicycle rides, THE TRADITIONAL and events for the benefit of the residents veterans: visiting the elderly, helping races, relays, rafting, hiking, etc. of cities and villages has long been part them around the house, and giving • Charity fairs and city festivals CATEGORIES of LUKOIL’s corporate culture. Our young them gifts. to encourage the residents of cities OF THE COMPETITION employees organize their own volunteer • Care for children – visits and villages to provide charitable ARE: projects and participate in local initiatives. to orphanages and patronage aid to their neighbors. of child welfare institutions, Despite the large variety of campaigns, organizing related events Social and Cultural Projects Competition results our volunteers from all regions where and campaigns. “ENVIRONMENT” LUKOIL operates have shared priorities. • Environmental campaigns – These include the following types cleaning up natural sites, planting Indicator 2017 2018 2019 “SPIRITUALITY of support and social participation: trees in cities. Number of projects participating AND CULTURE” in the competition, units 3,364 3,645 3,607 Number of winning projects, units 739 772 785

“SPORTS” Financial support for winning projects, SOCIAL ENTREPRENEURSHIP RUB million 121 141 159

The “More Than Just a Purchase” project is a unique joint initiative between LUKOIL Group Russian entities supplying oil products and the “Our Future” Foundation of Regional Social Programs.

Improving the social climate in Russian regions SELECTED PROJECTS Neman, the Kaliningrad Region. The Spirituality and Culture (Dukhovnost Its purpose is to sponsor social More details about the project: i Kultura) organization implemented “The House where We Live” entrepreneurs1, who get the opportunity FINANCED IN 2019 project, aimed at improving the stays of disabled children at the children’s to sell their products at the Company’s AS OF 31 DECEMBER activity center. The grant was used to renovate the classroom and thereby filling stations.The project helps people 2019, OVER provide a more comfortable environment for classes. understand that, by buying goods under the “More Than Just a Purchase” brand, our clients buy high-quality goods Preservation of national and cultural identities produced by Russian companies that 107 employ disabled people, pensioners, SUPPLIERS WERE Ukhta, the Komi Republic. The Local History Museum in Ukhta and other socially vulnerable groups. implemented a project called “Craft is not a Shoulder Yoke.” This By making informed choices, they help PARTICIPATING exciting and modern project seeks to promote the traditions of the Komi people who need help. IN THE PROJECT, people. The project authors organized an exhibition of old household items and supplemented it with interactive zones for workshops. In 2019 we supported 34 entrepreneurs, WHILE THE GOODS Children can become hunters and find out about animal trails or learn including five branches of the All Russia OF 63 SUPPLIERS what a spinning wheel and a spindle are and the basics of weaving. Association of the Blind. The range of WERE SOLD AT LUKOIL More information about projects The exhibition is supplemented with paintings in the ethnofuturism style goods produced by social entrepreneurs LUKOIL supports can be found by the artist Yuri Lisovsky. and supplied to filling stations has FILLING STATIONS. on the Facebook page: been expanded: it now includes goods THIS IS THE LARGEST for cafes and for picnics. NETWORK OF SOCIAL Environmental improvement ENTREPRENEURS Solikamsk, the Perm Territory. The Travel Shore project of the Demidov IN RUSSIA. Memorial Botanical Garden. As part of the project, a new tourist trail was created on virgin lands of the garden covering 1.2 hectares. In addition to rare and collectable plants, art objects and 10 information stands were installed. 1. Social entrepreneurship refers to a special type of activity aimed at resolving or mitigating social issues using income from economic activities. Both small businesses and social non-profit organizations can be social entrepreneurs.

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SUPPORTING INDIGENOUS MINORITIES OF THE NORTH

Since 2017 a cooperation agreement LUKOIL continues to support We also implement charity projects, such Supporting indigenous minorities of the North in Russia as part has been in effect between PJSC LUKOIL the “Talents of the Arctic. Children” as the “Red Chum” project in the Nenets of licensing obligations and the Federal Agency for Ethnic project, which is aimed at encouraging Autonomous Area. Affairs, to promote the social, economic, interest among the children and cultural development of indigenous of indigenous minorities of the North LUKOIL-West Siberia has an Indigenous TOTAL IN 2019 RUSSIAN REGION minorities of the North. In 2019 the main in their native languages. In December People Relations Department that focus of cooperation was the preservation the Company supported the organization interacts with indigenous minorities of indigenous languages. LUKOIL of the winners’ visit to Moscow. of the North. Indigenous people can RUB385.6 KHANTY-MANSI NENETS joined the Organizing Committee As part of the event, the Company contact the Company’s employees MILLION AUTONOMOUS AUTONOMOUS of the International Year of Indigenous received a letter of gratitude by telephone. After receiving a request, AREA – YUGRA AREA TOTAL Languages 2019 in Russia. The Company from the Federal Agency for Ethnic Affairs, employees of the Indigenous People SUPPORT assisted the Russian delegation and was “For Contributing to Strengthening Relations Department prepare OF INDIGENOUS one of its participants at the official Nationwide Peace and Conciliation.” the necessary documents, which opening of the International Year The letter was presented to the Company are then assessed by management. MINORITIES RUB 355.1 RUB 30.5 RUB 385.6 of Indigenous Languages 2019 at the Federation Council of the Russian Traditionally, requests from indigenous OF THE NORTH IN RUSSIA 2019 MILLION MILLION MILLION at the UNESCO site in Paris. Also, LUKOIL Federal Assembly, after the ceremony minorities of the North are mainly was a partner of the “Year of Indigenous to award the winners of the “Talents practical in their nature - for example, AS PART OF LICENSING Languages in Russia” international forum of the Arctic. Children” cultural requests to connect a nomad camp OBLIGATIONS RUB 353.5 RUB 30.5 RUB 384.0

held in Khanty-Mansiysk. The Company and educational project. to the grid, to install additional water 2018 also participated in the 18th Session pipes at intersections of industrial roads MILLION MILLION MILLION of the UN Permanent Forum The Company has established crossing streams or lakes, or to construct on Indigenous Issues in New York, where and successfully operates mechanisms ramps on the sides of oil field roads RUB 311.4 RUB 30.5 RUB 341.9

it showcased its experience in supporting that allow indigenous minorities where deer migrate, etc. 2017 social projects to preserve and develop of the North and their organizations MILLION MILLION MILLION the national languages of indigenous to contact the Company and request minorities of the North. assistance or the protection of their rights.

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LUKOIL, as a leading company on the Russian market and a participant in the global supply chain, supports the efforts of the global community to limit increases in average annual temperature as a result of climate change caused by human activities. We see climate change as a challenge for all of us and we take the relevant risks and opportunities seriously. In 2019 the Company took comprehensive steps to better organize our activities in this area and to adopt a more systematic and strategic approach.

We are fully supportive of the United Nations 2030 Agenda for Sustainable Development. The Company recognizes that the goals outlined in this document are of vital importance for ensuring a prosperous future for the human society. Furthermore, greater efforts are required to ensure that the positive changes being made in support of a number of goals are sustainable. Therefore, we continue to implement programs aimed at both improving the operational performance of our enterprises and ensuring the wellbeing of the people living in the regions where we operate.

We have identified 11 global goals and 15 targets which we consider to be the most relevant to our operations and to which we are able to contribute. We achieved good success in 2019, but much remains to be done.

LUKOIL will continue to inform our stakeholders – government authorities, non-government organizations, local communities, shareholders, and investors – about the measures we take and the results we achieve in our annual sustainability reports.

We welcome feedback on the information published. We try to take into account all the questions and suggestions we receive, and to make changes in the data collection and analysis system as required in order to improve the quality of our reporting.

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APPENDICES

APPENDIX 1. LUKOIL GROUP’S STRUCTURE AS PER IFRS

Russia Abroad

Exploration and Production Other entities related to Refining, Marketingand Distribution Europe Verolma Mineralol GmbH Oil and Gas Production in Russia business sector business segment Exploration and Production LUKOIL INTERNATIONAL GmbH LLC LUKOIL-AIK LLC INTESMO Oil and Gas Production Abroad business sector AC MANAGEMENT COMPANY LIMITED SP Neftestroy LLC LUKOIL-KGPZ LUKOIL Overseas Atash B.V. ARJ LTD LLC LUKOIL-West Siberia LLC LUKOIL MarinBunker LUKOIL Overseas North Shelf AS LUKOIL Holding GmbH LLC ChumpassNefteDobycha JSC Morskoye Agentstvo Novotorik Refining, Marketing and Distribution MEROIL TANK S.L. LLC LUKOIL EPU Service LLC Donbunker Oil Refining Abroad business sector SOOO LLK-NAFTAN LLC Yuznho-Sardovskoye LLC LUKOIL-AVIA LUKOIL Neftohim Burgas AD SOOO LUKOIL-Inter-Kard-Bel LLC LUKOIL-Kaliningradmorneft LLC LLK-International ISAB S.r.l. VARS LLC UTTiST LLC LLK Marin Rus PETROTEL-LUKOIL S.A. Corporate and Other LLC LUKOIL-Komi JLLC LLK-NAFTAN Zeeland Refinary (PJSC LUKOIL holds a 45% share) LUKOIL Accounting and Finance Europe s.r.o. LLC LUKOIL-Nizhnevolzhskneft LLC LUKOIL-AERO TOTAL Opslag en Pijpleiding Nederland N.V. LUKOIL Technology Services GmbH LLC LUKOIL-Nizhnevolzhskneft-Kalmykiya LLC LUKOIL-AERO-Domodedovo Oil Product Supply Abroad business sector Asia, Middle East, Africa LLC LUKOIL-PERM LLC LUKOIL-AERO-Samara LUKOIL-BULGARIA EOOD Exploration and Production LLC UralOil LLC LUKOIL-AERO-Vostok LUKOIL Belgium Oil and Gas Production Abroad business sector LLC Perm-Invest LLC TZK-Arkhangelsk Auto Maas Tankstations B.V. LUKOIL Overseas Shah Deniz Midstream LLC RITEK JSC AERO-Sheremetyevo LUKOIL Italia S.r.l. LUKOIL Overseas Shah Deniz Ltd. LLC LUKOIL-Primoryeneftegaz LLC TZK Volga LUKOIL MACEDONIA LTD Skopje LUKOIL Uzbekistan Operating Company LLC LLC NK Yugranefteprom LLC TZK Severo-Zapad LUKOIL Netherlands B.V. SOYUZNEFTEGAZ VOSTOK LIMITED LLC TURSUNT LLC LUKOIL-Nizhegorodniinefteproekt LUKOIL ROMANIA S.R.L. LUKOIL Overseas Uzbekistan Ltd. LLC LUKOIL-Engineering LLC LUKOIL-Rezervnefteprodukt LUKOIL SERBIA PLC Belgrade LLP LUKOIL Kazakhstan Upstream Refining, Marketing and Distribution LLC LUKOIL-RNP-Trading Oy Teboil Ab Upstream Services Limited Oil Refining in Russia business sector LLC LUKOIL-Aero Kiinteisto Oy Nurmijarven Liikennepalvelukeskus LUKARCO B.V. LLC LUKOIL-Volgogradneftepererabotka LLC AERO-NEFTO LUKOIL Croatia Ltd. LUKOIL Overseas Karachaganak B.V. LLC LUKOIL-Nizhegorodnefteorgsintez Power Generation business sector LUKOIL MONTENEGRO DOO LUKOIL Overseas Kumkol B.V. LLC LUKOIL-Permnefteorgsintez LLC LUKOIL-Volgogradenergo IOOO LUKOIL Belorussia TURGAI-PETROLEUM JSC LLC LUKOIL-Ukhtaneftepererabotka LLC Volzhsk Heat Supply Networks LUKOIL-Moldova S.R.L. LUKOIL MID-EAST LIMITED Petrochemicals business sector LLC Kamyshin Combined Heat and Power Plant Power Generation business sector LUKOIL Overseas Iraq Exploration B.V. LLC Saratovorgsintez LLC Kamyshin CHPP LAND POWER S.A. LUKOIL SAUDI ARABIA ENERGY LIMITED LLC Stavrolen LLC Teplovaya Generation G. Volzhskogo Other entities related to Refining, Marketing and Distribution LUKOIL OVERSEAS EGYPT LIMITED Transportation business sector LLC LUKOIL-Astrakhanenergo business segment Esh El Mallaha Petroleum Company LLC LUKOIL-Trans LLC Astrakhan Heat Supply Networks LUKOIL Aviation Bulgaria EOOD LUKOIL Overseas Etinde Cameroon Sarl LLC Varandey Terminal LLC LUKOIL-Kubanenergo LUKOIL-Bulgaria Bunker EOOD LUKOIL OVERSEAS GHANA TANO LIMITED LLC LUKOIL-Varandey-AVIA LLC LUKOIL-Stavropolenergo LUKOIL LUBRICANTS EAST EUROPE S.R.L. LUKOIL Overseas Nigeria Limited LLC RPK-Vysotsk LUKOIL-II LLC LUKOIL-Rostovenergo LUKOIL Lubricants Europe GmbH LUKOIL UPSTREAM PRODUCTION NIGERIA LTD LLC LUKOIL-KNT LLC Volgodonsk Heat Supply Networks LUKOIL LUBRICANTS UKRAINE, TOV LUKOIL Overseas Riyadh Ltd JSC LUKOIL-Chernomorye LLC Rostov Heat Supply Networks LUKOIL MARINE LUBRICANTS DMCC Refining, Marketing and Distribution Oil Product Supply in Russia business sector LLC Volgodonskaya Teplovaya Generation LUKOIL Marine Lubricants Germany GmbH Oil Product Supply Abroad business sector LLC LUKOIL-Rostovnefteprodukt LLC LUKOIL-Ekoenergo LITASCO SA LUKOIL Eurasia Petrol Anonim Sirketi LLC LUKOIL-Severo-Zapadnefteprodukt LLC LUKOIL-ENERGOSERVIS LUKOIL Hamburg GmbH LUKOIL-Azerbaidjan, ZAO LLC LUKOIL-Uralnefteprodukt LLC LUKOIL-ENERGOSETI LUKOIL Benelux B.V. LUKOIL-Georgia Ltd. LLC LUKOIL-Tsentrnefteprodukt LLC LUKOIL-TsUR EIGER SHIPPING SA OOO LUKOIL Uznefteprodukt LLC LUKOIL-Yugnefteprodukt LLC LUKOIL-Energoengineering LUKOIL Overseas Supply and Trading Ltd. LLC LICARD (LUKOIL-Inter-Card) LUKARCO Finance B.V. LUKINTER FINANCE B.V. Corporate and Other LUKOIL Europe Holdings B.V. PJSC LUKOIL LLC LUKOIL PERSONNEL LUKOIL Holding B.V. LLC LUKOIL-INFORM LLC Arkhangelskgeolrazvedka LUKOIL International Finance B.V. LLC LUKOIL-Technologii LLC K.N. Holding LUKOIL International Upstream Holding B.V. LLC LUKOIL-Accounting Center LUKOIL International Secondment B.V. LUKOIL SECURITIES LIMITED LICARD Euro Services GmbH LUKOIL Capital Markets Ltd

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Abroad APPENDIX 3. GRI CONTENT INDEX This report has been prepared in accordance with the GRI Standards (Core option) Other entities related to Refining, Marketingand Distribution Americas business segment LUKOIL MARINE LUBRICANTS USA INC. LUKOIL Lubricants Middle East Madeni Yag Sanayi ve Ticaret LUKOIL Lubricants Mexico, S.de R.L.de C.V. 102-55 GRI Standards and Indicators Table Limited Sirketi LUKOIL NORTH AMERICA LLC LUKOIL Lubricants Central Asia LLP LUKOIL Pan Americas, LLC LUKOIL Lubricants (China) Co., Ltd. LUKOIL Lubricants Mexico S.de R.L.de C.V. Index Indicators Section of the Report Page LUKOIL Lubricants Africa, S.A.R.L. LUKOIL MARINE LUBRICANTS USA INC. Akpet Gaz A.S. LUKOIL International Upstream West Inc GRI 101. Reporting Principles Sustainable development context Lukoil Istasyon Isletmeciligi Limited Şirketi INTEGRATED EXPLORATION AND PRODUCTION SERVICES, S. Materiality Akpet Akaryakit Dag. A.S. de R.L. de C.V. Completeness Akdeniz Boru Natlari Nakliyat ve Isletmecilik Ic ve Dis Tic. Ltd Sti LUKOIL UPSTREAM MEXICO, S. de R.L. de C.V. Considering stakeholders’ opinions Op-Ay Akaryakit Tic. Ltd. Sti. ISTASYON YONETIMI VE PETROL URUNLERI TICARETI GRI 102. General Disclosures 2016 ANONIM SIRKETI 1. Organizational profile LITASCO SA LLP LITASCO Central Asia 102-1 Name of the organization About the Company: highlights of the year 18 LITASCO Middle East DMCC 102-2 Activities, brands, products, and services About the Company: highlights of the year. 6–9, 18 IRAQ PETROLEUM TRAIDING DMCC Two-page openings: Business Model, LUKOIL ASIA PACIFIC PTE LTD. Geography 102-3 Location of headquarters About the Company: highlights of the year 18 https://www.lukoil.com/Company/contacts APPENDIX 2. IDENTIFICATION OF MATERIAL TOPICS OF THE REPORT 102-4 Location of operations Two-page opening Geography 8-9 https://www.lukoil.com/Company/BusinessOperation/GeographicReach The procedure for determining the material • analysis of sustainability reports of oil topics and issues identified for 2019 topics of the Report is performed and gas companies can be found on two-page opening 102-5 Ownership and legal form Annual report in accordance with the Global Reporting • analysis of the results of an audit of the Sustainability Report (page 18). Information about PJSC LUKOIL’s share capital and securities is available on the corporate Initiative (GRI) standards, with a focus and external assurance of the report website: on SASB standards and UN Global for the previous reporting period The Report takes into account where https://www.lukoil.com/InvestorAndShareholderCenter/Securities/sharecapital Sustainable Development Goals. • analysis of media publications possible the recommendations Recently, discussions have intensified • analysis of legislative requirements received after the external assurance 102-6 Markets served Two-page opening Geography 8-9 on the need to introduce more precise for non-financial information disclosures, of the Sustainability Report for 2018 102-7 Scale of the organization About the Company: highlights of the year 18 criteria and procedures for determining requirements of financial platforms, • Describe a procedure for identifying materiality, which could ensure comparability monitoring of non-financial reporting material topics 102-8 Information on employees and other workers Our employees 130 of the results of the analysis of material systems and major initiatives in this area • Provide more detail on the impact The information on employment agreements is consolidated by the Company without topics in the reports of different companies1. • surveys of PJSC LUKOIL unit heads, of digitalization of the Company’s a breakdown by permanent and temporary employees. Workers that are legally recognized We support it and will be guided heads of LUKOIL Group entities, activities on efficiency improvement, as being self-employed, or individuals other than permanent and temporary employees by the discussion results. members of the Board of Directors sustainable resource use, risk of LUKOIL Group entities are not significantly engaged in operations and the Management Committee (once management (in progress as projects For the reporting purposes, a material every two years), ranking of material are being implemented) 102-9 Supply chain Stakeholder management. 40, 44 topic is a topic that reflects the Company’s topics and issues based on the results • Describe the Company’s experience Supply chain significant long-term economic, (scoring is applied) in supplier assessment during tenders 102-10 Significant changes to the organization environmental and social impact (positive • stakeholder engagement during (environmental and social aspects and its supply chain or negative) on the countries/regions a reporting year in various formats of their activities) as part of implementing of operations and local communities, (roundtables, responses to inquiries, the principle of a responsible supply Data on the supply chain are not consolidated and/or affects the interests of / may surveys of consumers and employees, chain affect stakeholders. Each material topic working groups, participation in external • Other recommendations are taken 102-11 Precautionary Principle or approach includes a number of issues that may initiatives, etc.). into account and will be implemented As part of its existing risk management system, the Company employs a cautious approach be rather specific to a particular territory in the course of the reporting information in the performance of Environmental and Social Impact Assessment (ESIA) procedures or a time period, and, accordingly, may vary The analysis findings are presented as a list preparation. and in planning its Environmental Safety Program activities. from report to report. of relevant issues. Based on qualitative analysis (repeatability, scale, rating issued 102-12 External initiatives Two-page opening Material topics 12-13 Our goal is to continuously improve by managers of PJSC LUKOIL, etc.), material of the Report the quality of corporate sustainability issues are identified and grouped into 102-13 Membership of associations Appendix 4. Individual GRI Standards 166 reporting and its informative value material topics. The Sustainability Task Force and Indicators to stakeholders. To attain it we perform approves the list of material topics. The Non- the following procedures: Financial Reporting Regulations are being 2. Strategy developed by LUKOIL Group. Material 102-14 Statement from senior decision-maker Message from the President of PJSC LUKOIL 2-3 1. Sources: https://www.datamaran.com/blog/materiality-corporate-accountability/;https://pages.datamaran.com/hubfs/Materiality%20best%20 102-15 Key impacts, risks and opportunities Risk management 31 practice.pdf?__hstc=154248359.8c6101132400fe2f5773e6a290a018c2.1580502787058.1580547645408.1581252863433.4&__hssc=154248359.2 .1581252863433&__hsfp=1696309790

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Index Indicators Section of the Report Page Index Indicators Section of the Report Page

3. Ethics and integrity 102-47 List of material topics Two-page opening Material topics 12-13 of the Report 102-16 Values, principles, standards and norms https://www.lukoil.com/Company/ 34-35 of behavior CorporateProfile 102-48 Restatements of information Ethics and statutory compliance No restatements were applied Human rights 102-49 Changes in the list of material topics Appendix 2. Identification of material topics 158 102-17 Mechanisms for advice and concerns Ethics and statutory compliance 34-35 and material topic boundaries of the Report about ethics Human rights The list of material topics remained the same as in the Sustainability Report for 2018. 4. Governance The indicator boundaries are specified in the Report and in Appendix 10.

102-18–102-19 The corporate governance system is detailed in the Annual Report for 2019, page 40-41, 102-50 Reporting period About the Report 16 as well as on the corporate website: https://www.lukoil.com/Company/CorporateGovernance 102-51 Date of most recent report 16 102-20 Executive-level responsibility Sustainability and climate change 24-25 for economic,environmental, and social management 102-52 Reporting cycle 16 topics 102-53 Contact point for questions regarding 185 102-21 Consulting stakeholders on economic, Stakeholder engagement 41-43 the report environmental, and 102-54 Statement of compliance with the GRI About the Report 16, 159 social topics Standards 102-22–102-28 The corporate governance system is detailed in the Annual Report for 2019, page 40-41, 102-55 GRI Standards and Indicators Table Appendix 3. GRI Content Index 159-166 as well as on the corporate website: https://www.lukoil.com/Company/CorporateGovernance 102-56 External assurance About the Report, Appendices 8 and 9 16, 175, 179 102-29 Identifying and managing economic, Two-page opening LUKOIL Group’s strategic 10-11 environmental, and goals in sustainable development GRI 103. Management Approach 2016 social impacts 103-1 Explanation of the material topic and its boundary 102-31 Review of economic, environmental, Stakeholder engagement 41-43 and social topics Explanation of selecting material topics and boundaries is given before the disclosure of data on the material topic or issue 102-32 Highest governance body’s role Sustainability and climate change 23, 27 in sustainability reporting management 103-2 The management approach and its components 102-33 Communicating critical concerns Sustainability and climate change 27 management The management approach is disclosed in the Report before information on each material topic. 102-35–102-37 The corporate governance system is detailed in the Annual Report for 2019, page 40-41, as well as on the corporate website: https://www.lukoil.com/Company/CorporateGovernance 103-3 Evaluation of the management approach

102-38 Highest-paid employees’ compensation Appendix 5. Individual Basic Indicators 169 Management approaches are evaluated within the framework of certification and supervisory to average pay of the other employees and RSPP Sustainability Indices Indicators audits of relevant management systems, and as part of corporate inspections. Information of the Company (excluding the highest-paid on those activities is contained in the Report. staff) ratio GRI 201. Economic Performance 2016 The indicator is disclosed partially, with regard to compensation of the Board of Directors and Management Committee members 201-1 Direct economic value generated Appendix 4. Individual GRI Standards 167 and distributed economic value and Indicators 5. Stakeholder engagement 201-3 Defined benefit plan obligations and other Social policy 134 102-40 List of stakeholder groups Stakeholder engagement 39 retirement plans

102-41 Collective bargaining agreements Human rights 36 GRI 202. Market Presence 2016 102-42 Identifying and selecting stakeholders Stakeholder engagement 39-40 202-1 Standard entry level wage by gender Social policy 133 Two-page opening Material topics in significant areas of operations 102-43 Approach to stakeholder engagement of the Report 39-40 102-44 Key topics and concerns raised 12-13 202-2 Proportion of senior management Employment and diversity 131 hired from the local community (foreign 6. Reporting practice operations)

102-45 Entities included in the financial statements Appendix 1. LUKOIL Group’s structure as per 156-158 GRI 203. Indirect Economic Impact 2016 IFRS 203-1 Infrastructure investments and services External social policy priorities 145 102-46 Defining report content and topic About the Report, Appendix 2. Identification 16, 158 supported boundaries of material topics of the Report The indicator is disclosed partially.

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GRI 204. Procurement Practices 2016 305-6 Emissions of ozone-depleting substances (ODS) 204-1 Proportion of spending on local suppliers Supply chain 44 in significant areas of operations The Company does not use ozone-depleting substances (ODS) on an industrial scale. 305-7 Nitrogen oxides (NO ), sulfur oxides (SO ), Emissions 115-116 The data are provided for the Russian entities of LUKOIL Group. X X and other significant air emissions GRI 206. Anticompetitive Behavior 2016 GRI 306. Affluents and Waste 2016 206-1 Legal actions for anti-competitive behavior, Ethics and statutory compliance 34 anti-trust, and monopoly practices 103-1, 103-2, The management approach 110 103-3 GRI 207. Tax 2019 Department responsible – HSE Department of PJSC LUKOIL

207-1 Approach to tax State Payments Reports 34 306-1 Water discharge by quality and destination Water 112

207-4 Country-by-country reporting Ethics and statutory compliance 34 306-2 Waste by type and disposal method Waste 117 State Payments Reports 306-3 Significant spills Pipeline reliability and emergency 90 State Payments Reports have been published on the corporate website since 2015: preparedness https://www.lukoil.com/InvestorAndShareholderCenter/RegulatoryDisclosure/ 306-4 Transport of hazardous waste reportonpaymentstogovernments LUKOIL Group entities do not transport hazardous waste. See the waste disposal methods GRI 302. Energy 2016 in the Waste section.

103-1, 103-2, The management approach Energy conservation 59 GRI 307. Environmental Compliance 2016 103-3 Department responsible – Department of Energy Efficiency and Energy Supply 307-1 Non-compliance with environmental laws Environmental safety program 104 of PJSC LUKOIL and regulations 302-1 Energy consumption within the organization Energy conservation 62-63 GRI 308. Supplier Environmental Assessment 2016 302-3 Energy intensity Energy conservation 63 103-1, 103-2, The management approach Supply chain 45 302-4 Reduction of energy consumption Energy conservation 63 103-3 Regulations: Regulations on Holding Tenders to Select Suppliers and Contractors 302-5 Reductions in energy requirements Product quality and customer relations 34 of LUKOIL Group Entities; HSE Policy of PJSC LUKOIL in the 21st Century; PJSC LUKOIL of products and services Standard Health, Safety and Environment Management System: Contractors Requirements. Department responsible – HSE Department of PJSC LUKOIL GRI 303. Water and Еffluents 2018 308-1 New suppliers that were screened using Supply chain 45 303-1, Interactions with water as a shared resource Water 106 environmental criteria 303-2 Management of water discharge-related impacts GRI 401. Employment 2016

Department responsible – HSE Department of PJSC LUKOIL 103-1, 103-2, The management approach Our employees 131 103-3 303-3 Water withdrawal Water 107-108 Department responsible – HR Policy Department of PJSC LUKOIL The indicator is disclosed partially. 401-1 New employee hires and employee turnover Personnel characteristics 129-130 303-4 Water discharge Water 111 The indicator is disclosed partially. 401-2 Benefits provided to full-time employees that Social policy 132 are not provided to temporary or part-time GRI 304. Biodiversity 2016 employees

304-1 Protected or rehabilitated areas Biodiversity conservation 122-123 Social benefits are granted to all employees, regardless of the type of employment.

GRI 305. Emissions 2016 GRI 402. Labor/Management Relations 2016

103-1, 103-2, The management approach Approaches to managing climate change 53 402-1 Minimum notice periods regarding Appendix 4. Individual GRI Standards 166 103-3 issues operational changes and Indicators

Department responsible – HSE Department of PJSC LUKOIL GRI 403. Occupational Health and Safety 2018

305-1 Direct GHG emissions (Scope 1) Goals and indicators 56-57 403-1 Occupational health and safety management Occupational safety 72-73 system 305-4 GHG emissions intensity (Scope 1) Goals and indicators 56-57 Department responsible – HSE Department of PJSC LUKOIL 305-5 Reduction of GHG emissions Goals and indicators 58

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403-2 Hazard identification, risk assessment, Occupational safety 32, 78 GRI 407. Freedom of Association and Collective Bargaining 2016 and incident investigation Risk management The management approach Human rights. Appendix 6 86, 169 403-3 Occupational health services Health in the workplace 86 GRI 408. Child Labor 2016 403-4 Worker participation, consultation, Occupational safety 77 and communication on occupational health The management approach Human rights. Appendix 6 86, 169 and safety

403-5 Worker training on occupational health Occupational safety 77 GRI 409. Forced or Compulsory Labor 2016 and safety The management approach Human rights. Appendix 6 86, 169 403-6 Promotion of worker health Health in the workplace 86 GRI 411. Rights of Indigenous Peoples 2016 403-7 Prevention and mitigation of occupational Occupational safety 76 health and safety impacts directly linked 103-1, 103-2, The management approach Human rights 37 by business relationships 103-3 Department responsible – Regional Communications Department of PJSC LUKOIL 403-8 Workers covered by an occupational health Occupational safety 73 and safety management system 411-1 Incidents of violations involving rights Human rights 37 of indigenous peoples Since the Company has in place an integrated HSE management system certified under ISO 14001and OHSAS 18001 standards, the proportion of employees covered GRI 412. Human Rights Assessment 2016 by this management system is the same in terms of environmental protection management 103-1, 103-2, The management approach Human rights. Appendix 6 86, 169 and labor protection management. 103-3 403-9 Work-related injuries Occupational safety 412-1 Operations that have been subject to human Human rights 86, 169 GRI 404. Training and Education 2016 rights reviews or impact assessments

103-1, 103-2, The management approach Training and development 136 GRI 413. Local Communities 2016 103-3 Department responsible – Department of Personnel Assessment and Development 103-1, 103-2, The management approach External social policy priorities 144 of PJSC LUKOIL 103-3 Department responsible – Public Relations Department of PJSC LUKOIL 404-1 Average hours of training per year per Training and development 136 413-1 Operations with local community External social policy priorities 144 employee engagement, impact This information is disclosed without breakdown by gender and categories of employees in assessments, and development programs accordance with Company data collecting system. All the Company’s subsidiaries of the business segments “Exploration and Production” and “Refining, Marketing and Distribution” (except for subsidiaries conducting trade operations) have programs in place related to local community engagement 404-2 Programs for upgrading employee skills Appendix 4 Individual GRI Standards 166 GRI 415. Public Policy 2016 and transition assistance programs and Indicators

404-3 Percentage of employees receiving regular Appendix 4 Individual GRI Standards 166 GRI 415-1. Political contributions performance and career development and Indicators Political contributions – none. Incentive payments 34-35 reviews to representatives of state authorities – none. Information is provided without breakdown by gender and categories of employees, GRI 419. Socioeconomic Compliance 2016 as this information is not consolidated and is not used to manage this issue in the Company

GRI 405. Diversity and Equal Opportunity 2016 103-1, 103-2, The management approach Ethics and statutory compliance 103-3 Regulations: Antimonopoly Policy 405-1 Diversity of governance bodies Sustainability and climate change 23, 129 Department responsible – International Dispute Legal Support Department of PJSC LUKOIL and employees management Personnel characteristics 419-1 Significant fines and non-financial Ethics and statutory compliance 34-35 sanctions for non-compliance with laws 405-2 Ratio of basic salary and remuneration Social policy 133 and regulations in the social and economic of women to men area GRI 406. Non-Discrimination 2016

406-1 Incidents of discrimination and corrective Human rights. 35 actions taken

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APPENDIX 4. INDIVIDUAL GRI STANDARDS AND INDICATORS GRI 102. General information of the Management Board The Company’s obligations to its of the organization workforce are set forth in the Social 201-1 (2016) Direct economic value generated and distributed, RUB mln 102-13 Membership of associations • The Union of Oil Companies of Serbia. Code of PJSC LUKOIL, specified Representatives from LUKOIL in the course of collective negotiations The Company is a member of a number SERBIA PLC Belgrade hold positions with trade-union organizations, 2017 2018 2019 of trade and professional associations, in the management bodies; and enshrined in the Agreement including: the subsidiary is an active participant between the Company and the Trade Direct economic value generated 6,010,089 8,058,338 7,899,281 • The National Council for Professional in all the organization’s undertakings Union Association of Public Joint-Stock Qualifications under the President • The Turkish LPG Association (Türkiye Company LUKOIL Oil Company for 2015– Revenue 5,936,705 8,035,899 7,841,246 of the Russian Federation LPG Derneği) and the Union 2020, as well as in internal regulations. Income from financial investments 15,151 19,530 25,134 • The Council for Professional of Chambers and Commodity The freedom of collective negotiations Qualifications in the Oil and Gas Exchanges of Turkey (ТОВВ). is set out in the following clauses Income from disposal of tangible assets 58,233 2,919 32,801 Industry of Russia LUKOIL subsidiaries participate of the Agreement: actively in discussions of practical Distributed economic value -5,380,245 -7,277,460 -6,991,791 • Russian Union of Industrialists • “2.5.7. To provide representatives and Entrepreneurs (RSPP) issues related to the development of trade-union organizations Operating expenses -3,908,114 -5,297,908 -5,076,133 • The Airport Civil Aviation Association – of the Turkish gas market with the ability to participate LUKOIL-AERO is a member • The Belgian Petroleum Federation in the work of the management bodies Wages and salary -127,851 -135,671 -143,602 • The Bulgarian Oil and Gas Association • The Croatian Energy Regulatory of the controlled organizations.” • The Macedonian-Russian Chamber Agency (Hrvatska energetska • “2.5.9. To adopt internal regulations Other employee payments and benefits -1,135 -31,300 -31,366 of Commerce and Industry, regulatorna agencija). LUKOIL and decisions with due consideration Payments to capital providers, including: -166,125 -195,669 -226,376 the Chamber of Commerce Croatia Ltd. does not occupy for the opinions of (by agreement of Montenegro a position in the management with) the union committee • dividends paid -141,499 -160,365 -184,787 • The National Oil Committee of Serbia, bodies and regards its membership (council) of the corresponding • interest paid to creditors -24,626 -35,304 -41,589 which is a member of the WPC (World as strategic trade-union organization in cases Petroleum Council) • The Croatian Chamber of the Economy stipulated by the Russian Labor Budget contributions -1,168,011 -1,608,127 -1,505,086 • The Association of Fuel Distribution (Hrvatska gospodarska komora) – Code, the Industry Agreement, Companies of Turkey (ADER). Akpet LUKOIL Croatia Ltd. does not occupy this Agreement, and the collective Societal investment -9,009 -8,785 -9,228 GAZ A.S. and Lukoil Eurasia Petrol A.S. a position in the management bodies agreements of the controlled Undistributed economic value 629,844 780,878 907,490 are members of the organization and views its membership as strategic organizations.” • The Association of Oil and Petroleum • The Netherlands Organization Product Distributors of Montenegro for the Energy Sector. Trade unions are also granted the right • The Union of Energy and Extractive to participate in management decision- Notes. and administrative expenses – Wages Dividends paid = Dividends paid Industry of Montenegro – LUKOIL 102-41 Collective bargaining making processes on an equal basis and salaries – Other employee payments on Company shares + Dividends paid Montenegro DOO is a member agreements with the Company’s management. Income from financial investments = and benefits + Exploration expenses. to non-controlling interest holders. Income from interest on deposits + Income from interest on loans issued + Wages and salaries = Labor pay Interest paid to creditors = Interest Other financial income. (including labor pay, estimated liabilities, expense + Other financial expenses. compensation and incentive payments, GRI 404-3. Percentage of employees receiving regular performance and career development reviews Income from disposal of tangible pension insurance, voluntary health Budget contributions = Taxes (other than assets = Income from sale and disposal insurance, voluntary accident insurance). income tax) + Excise taxes and export of assets. duties + Current income tax. Performance reviews are conducted with respect to PJSC LUKOIL employees. Other employee payments and benefits = Operating expenses = Operating Employee reward program payments. Societal investment = Charity expenses. expenses + Cost of purchased oil, gas Indicator 2017 2018 2019 and refined products + Transportation PJSC LUKOIL employee headcount, people 2,331 2,351 2,406 expenses + Selling, general Total PJSC LUKOIL employees who received an official performance review, people 2,109 2,121 2,210

Percentage of the total number of PJSC LUKOIL employees 90% 90% 92%

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402-1 Minimum notice periods regarding operational changes APPENDIX 5. INDIVIDUAL BASIC INDICATORS AND RSPP SUSTAINABILITY INDICES INDICATORS

Region Minimum notice period Economic effect of the implementation of the Energy Conservation Program, RUB mln Belgium 3 months

Russia, Azerbaijan, Bulgaria, Moldova, Serbia, 2 months 2017 2018 2019 and Uzbekistan 1,184 1,165 1,445 Austria 6 weeks

Germany, Switzerland, Italy, Macedonia, Norway 1 month

Romania For specialists 20 days; for executives 45 days

Finland, Turkey 14 days Percentage of employees covered by the management systems certified to be compliant with the ISO 14001 and OHSAS 18001 standards Kazakhstan 15 business days or 1 month Belarus 7 days (in the event of staff reductions or the liquidation of the enterprise 2017 2018 2019 – 2 months) 79% 84% 83% Egypt 1 week

Georgia 3 days

Iraq, Montenegro, Mexico No notice period is established for employees Remuneration to the Board of Directors and Management Committee’s members, RUB thousand

The USA No universal period has been established for substantial changes to working conditions, however, under certain circumstances the law may prescribe Remuneration 2017 2018 2019 special procedures and periods. For example, during mass staff reductions, Members of the Board of Directors 262,091 816,787 208,784 a notice period of at least two months Members of the Management Committee 1,738,788 5,502,415 1,684,611

404-2 Programs for upgrading employee skills and transition assistance programs APPENDIX 6. HUMAN RIGHTS

Type of training Training programs and courses As an international company operating in countries • Agreement between the Company and the Trade Union with different political systems and cultural traditions, LUKOIL Association of Public Joint-Stock Company LUKOIL Oil In-house training courses DLS: over 300 educational courses on the following topics: Quality recognizes the importance of respect for and observance Company; Management and Lean Manufacturing, Organizational Change Management, of fundamental human rights and is guided by the provisions • Agreement between PJSC LUKOIL and the IATUO Project Management, Management, Personal Effectiveness, Foreign of the UN Universal Declaration of Human Rights. Our of PJSC LUKOIL for the foreign entities; Languages, Corporate Spirit, IT Courses (Outlook, Excel, PowerPoint), Public commitments and rules of engagement with local communities • The Social Code of PJSC LUKOIL. Speaking and Presentations, People Management, Human Resources and indigenous peoples in the regions where we operate Management, Effective Negotiations, Production Orientation, Oil Product (including consultation activities) are set out in the following These commitments cover all the areas of the Company’s activity Supply, Risk Management, IT Security, Civil Defense and Emergency documents: and involve informing partners with whom LUKOIL Group Protection, Industrial Safety, Occupational Safety, Fire Safety. • Code of Business Conduct and Ethics of PJSC LUKOIL; entities interact. • Global Framework Agreement between IndustriALL Global External training or education Professional retraining, education in MBA, EMBA, DBA programs. Union1, the Russian Oil, Gas and Construction Workers’ Union, The Company has also adopted the relevant provisions The Company pays 50% of the cost of employee education. PJSC LUKOIL and the IATUO of PJSC LUKOIL; of the voluntary Extractive Industries Transparency Initiative If the employee receives an additional professional education, including (EITI2). a postgraduate degree, where the employer is not the initiator, then educational leave is granted, and the respective employee receives a guarantee that they will not lose their positions while studying.

1. Source: http://www.industriall-union.org/ru/archive/icem/globalnoe-ramochnoe-soglashenie-mezhdu-icem-i-lukoyl . IndustriALL monitors the observance of labor rights by global companies operating all over the world. 2. Source: https://eiti.org/.

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Commitments Compliance Code Global Social Code Commitments Compliance Code Global Social Code with international of Business Framework of PJSC LUKOIL with international of Business Framework of PJSC LUKOIL documents Conduct Agreement documents Conduct Agreement and the United Nations and Ethics with IndustriALL and the United Nations and Ethics with IndustriALL Global Compact of PJSC LUKOIL Global Compact of PJSC LUKOIL

No child labor, forced ILO Conventions No. 29, Respect for the rights of local UN Declaration and compulsory labor 105, 138, 182 communities, including resource use, on the Rights Principles 4, 5 • • • environmental conservation, etc. of Indigenous Peoples • • of the United Nations ILO Convention No. 169 Global Compact EITI

Businesses should uphold ILO Conventions No. 87 Businesses should avoid International the freedom of association and 98 the resettlement of local residents, Finance Corporation • • and the effective recognition Principle 3 of the United where possible, and mitigate Performance Standard • of the right to collective bargaining Nations Global Compact the impact on those who have been 5 Land Acquisition affected by such measures and Involuntary Recognition of equal opportunities ILO Conventions No. 100, Resettlement for men and women, equal payment 111 • • • for equal work, no discrimination EITI Compliance with the indigenous International Finance peoples’ Free Prior and Informed Corporation Performance Recognition of the value of family ILO Convention No. 156 • • Consent (FPIC) principle when Standard 7 relations, support for working women implementing projects

No discrimination on any ILO Convention No. 111 Preservation of national and cultural grounds (hiring, labor pay, career Principle 6 of the United • • • • • traditions, values, arts and crafts development, retirement, gender, Nations Global Compact race, religious beliefs, etc.) Contribution to the preservation Principles 7, 8, 9 • of healthy environment of the United Nations HSE Policy No violence in any form • Global Compact of LUKOIL Group EITI Compliance with the working time ILO Conventions No. 47, • • standards 106, 132, 171 Anti-corruption and bribery Principle 10 of the United • Fair access to benefits received Nations Global Compact (compliance Maintenance of favorable working ILO Conventions No. 155, from mining operations EITI with contractual conditions, workers' health, sanitary 161, 187 terms, payment and hygienic standards (access • • • of taxes) to clean water, hot meals, sanitary conditions)

Attention to security issues UN Universal Declaration (including protection of personal of Human Rights, Article data and protection of employees 12 • from criminal encroachments and pressure)

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APPENDIX 7. ACRONYMS AND ABBREVIATIONS, DEFINITIONS AND CALCULATION UNITS OF MEASUREMENT FORMULAS

boe – barrel of oil equivalent toe, kg of oil equivalent – tonne CO2E – CO2 equivalent NAMES OF LUKOIL GROUP ENTITIES (kilogram) of oil equivalent p. p. – percentage point

Nizhny Novgorod oil refinery – LLC Ukhta oil refinery – LLC Perm oil refinery – LLC LUKOIL-Nizhegorodnefteorgsintez LUKOIL-Ukhtaneftepererabotka LUKOIL-Permnefteorgsintez INDICATORS, CALCULATION FORMULAS

Oil refinery in Romania – PETROTEL- Oil refinery in Bulgaria – LUKOIL Oil refinery in Italy (ISAB) – ISAB S.r.l. LUKOIL S.A. Neftochim Burgas AD Lost Time Accident Frequency Rate, as a result of work-related injury / number The number of employees dismissed LTAFR = number of accidents / employee of hours worked × 1,000,000 man-hours. due to turnover includes employees headcount for a reporting period × 1,000 dismissed for absenteeism and other 1 ABBREVIATIONS employees. Rate of High-Consequence Work- violations of labor discipline, as well Related Injuries = number of high- as due to the employee’s unsuitability Lost Time Injury Frequency Rate, LTIFR consequence work-related injuries for their position because of lack of skill; = number of lost time injuries / number (excluding fatalities) / number of hours those who left on their own without APG – associated petroleum gas ESG – Environmental, Social LLC – limited liability company of man-hours worked × 1,000,000 worked × 1,000,000 man-hours. serious cause (due to relocation, and Corporate Governance man-hours. retirement, care for a child under 14 years CCUS (or CCS) – carbon capture, Media – all types of mass media The turnover rate is defined as the ratio of age, etc.) or by agreement between (utilization) and storage EOR – CO₂-Enhanced Oil Recovery Rate of Fatalities as a Result of Work- of the number of employees dismissed the parties (except for employees who OJSC - open joint stock company Related Injury = number of fatalities due to turnover to the average were re-employed during the year). CHPP – combined heat and power plant GHG – greenhouse gases headcount for a reporting period. PPE - personal protection equipment DLS – distance learning system GPP - gas processing plant RES – renewable energy sources OIL REFINERY YIELD IS CALCULATED USING THE FOLLOWING FORMULA: EBITDA – Earnings before Interest, HSE – health, safety and environment Taxation, Depreciation & Amortization STO – standard of an entity HPP - hydro power plant Q-(FFO+L) EITI – Extractive Industries Transparency SPP – solar power plant Refinery yield= *100% FFO – is the gross amount of furnace When calculating the aggregated Initiative IMN – indigenous minorities of the North Q fuel oil (fuel oil for sale + liquid fuel “Oil refinery yield” indicator, the actual TPU - territorial production unit for technological (own) needs); volume of oil feed (Q) comprises KPI – key performance indicator where Q – is the actual volume of oil the feedstock (oil, gas condensate) feed processed in crude distillation L – is the amount of irretrievable processed in crude distillation units units (Atmospheric and Vacuum losses of oil refining, excluding (Atmospheric and Vacuum Distillation NAMES OF OTHER ENTITIES AND INITIATIVES Distillation Units and Atmospheric the losses at crude oil electric desalting Units and Atmospheric Distillation Units), Distillation Units), as well as received feed and dehydration plant. excluding other types of feed processed from the secondary refining processes in secondary refining processes (in (catalytic cracking, delayed coking, etc.); the framework of the intragroup supplies). IATUO – International Association ACCES – Arctic Climate Change, Climate Action 100+ – Global Initiative of Trade-Union Organizations Economy and Society, a European Climate Action 100+ (http://www. of PJSC LUKOIL research project that examines climateaction100.org/) DEFINITIONS the impact of climate change on shipping ILO – International Labour Organization in the Arctic region and the main GRI – Global Reporting Initiative economic sectors of the Arctic states, ISO - International Organization such as fisheries and oil and gas WWF – World Wildlife Fund Claim relating to the breach of law Payroll means the indicator calculated tax and other withholdings) for worked for Standardization production. means an administrative or criminal in accordance with the instructions and non-worked time, compensation OHSAS – Occupational Health and Safety claim filed against PJSC LUKOIL, its for filling out forms of federal statistical payments related to the work schedule UN – United Nations CDP – Carbon Disclosure Project Assessment Series subsidiaries, or PJSC LUKOIL employees monitoring, approved by Order and working conditions, additional or its subsidiaries’ employees. Only of Rosstat of 12 October 2008 No. payments and increments, bonuses, one- PJSC LUKOIL – Public Joint Stock SDGs – UN Sustainable Development completed cases in which a final 278 with amendments and additions time incentive payments, as well as regular Company “Oil Company “LUKOIL” Goals (the UN 2030 Agenda decision has been rendered and which approved by Order of Rosstat of 3 allowances for food and accommodation for Sustainable Development) are not subject to further appeal are taken November 2009 No. 240. Payroll includes in accordance with the methodology RSPP – Russian Union of Industrialists into account. Cases in which the entity labor pay to employees in monetary for filling in the payroll field in form No. P-4 and Entrepreneurs was found not guilty are not taken into and non-monetary forms accrued “Information on headcount and labor pay”. account in the disclosure of indicators. by an entity (including personal income

1. High-Consequence Work-Related Injury is an injury having the following consequences: the employee died or was injured, and within six months of being injured the employee is unable to recover, has not recovered his health, or is not expected to recover his health.

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Circulating water – means water that with the requirements of the Federal substance into the environment APPENDIX 8 is consistently and many times used Law “On Environmental Protection”, not provided for by technical regulations in processes based on the principle in the amount not less than and/or project documentation that of closed systems without discharging the one determined in accordance has not been restricted or contained into surface water bodies or sewage with the Regulations on Collecting by emergency protection systems and/ systems. and Processing Data on Material or other systems and means of accident Contingent Liabilities and Uncertainties prevention and containment provided Material claim relating to the breach with Regard to Income Taxes for by technical regulations and/ of law means a claim meeting one for the purposes of the consolidated or project documentation, or release of the following criteria: financial statements of OJSC LUKOIL in the absence of sufficient containment for a respective year. capability in such systems and means 1) an award has become effective in the amount exceeding the threshold within a calendar year bringing Significant incident with environmental values for accidents presented in Tables PJSC LUKOIL, LUKOIL Group entities impact means an emergency 1 and 2 of Annex 4 to the Safety Manual and/or their officials to administrative with environmental impact. An “Methodological recommendations responsibility for the offense emergency with environmental impact for the classification of man-made events Independent Practitioner’s Limited Assurance Report on provided for in Chapter 8 of the Code can include destruction of facilities and/ in the field of industrial safety at hazardous Sustainability Report of LUKOIL Group for 2019 of Administrative Offenses of the Russian or technical devices used at the facilities production facilities of the oil and gas Federation, with the imposition of LUKOIL Group entities, or any other complex” dated 24 January 2018 No. 29, of the maximum possible fine provided event resulting in one or a combination approved by Order of Rostechnadzor To the Management of PJSC LUKOIL for in the relevant article and/or of the following environmental impacts: of 24 January 2018 No. 29. a sanction in the form of administrative suspension of operations for up to 90 1) pollution of surface and underground Significant regions of LUKOIL Group’s IndependentIntroduction Practitioner’s Limited Assurance Report on days; water bodies which resulted in exceeding operation mean regions where Sustainability Report of LUKOIL Group for 2019 the established standards for permissible the number of employees of one We were engaged by the Management of PJSC LUKOIL (“the Management”) to report on 2) a court decision has become impact LUKOIL Group entity is 500 or more: Sustainability Report of LUKOIL Group (“the Group”) for 2019 (“the Report”) in the form of effective to collect from PJSC LUKOIL, 11 regions in the Russian Federation, To the Management of PJSC LUKOIL a limited assurance conclusion that, based on our work performed, nothing has come to our LUKOIL Group entities damages caused 2) uncontrolled release of hazardous and Belarus, Bulgaria, Georgia, Iraq, Italy, attention that causes us to believe that Management's Statement that the Report is to the environment in accordance substances – release of a hazardous Romania, Romania, Uzbekistan abroad. prepared, in all material respects, based on the “core” version of the Global Reporting Introduction Initiative Sustainability Reporting Standards (“the GRI Standards”) and is free from material misstatement, is not fairly stated. ROUNDING VALUES We were engaged by the Management of PJSC LUKOIL (“the Management”) to report on Sustainability Report of LUKOIL Group (“the Group”) for 2019 (“the Report”) in the form of a Management'slimited assurance Responsibilities conclusion that, based on our work performed, nothing has come to our attention that causes us to believe that Management's Statement that the Report is The total values of the indicators given prepared, in all material respects, based on the “core” version of the Global Reporting in the Report may differ from the sum Management is responsible for the preparation and presentation of the Report that is free Initiative Sustainability Reporting Standards (“the GRI Standards”) and is free from material of the indicators as a result of rounding. from material misstatement in accordance with the GRI Standards, and for the information misstatement, is not fairly stated. contained therein. This responsibility includes designing, implementing and maintaining internal control system Management'srelevant to the Responsibilitiespreparation of the Report that is free from material misstatement, whether due to fraud or error. It also includes: determining the Group’s objectives in respect of Managementsustainable developmentis responsible performancefor the preparation and reporting, and presentation including of the the identificationReport that isof free key fromstakeholders material misstatement groups and their in accordance material issues; with theselecting GRI Standards applicable, andrequirements for the information of the GRI containedStandards; therein. preventing and detecting fraud; identifying and ensuring that the Group complies with the laws and regulations applicable to its activities; selecting and applying appropriate This responsibility includes designing, implementing and maintaining internal control system policies; making judgments and estimates that are reasonable in the circumstances; relevant to the preparation of the Report that is free from material misstatement, whether maintaining adequate records in relation to the information included in the Report; ensuring due to fraud or error. It also includes: determining the Group’s objectives in respect of that staff involved in the preparation of the Report are properly trained, information systems sustainable development performance and reporting, including the identification of key are properly updated and that any changes in the reporting system encompass all key stakeholders groups and their material issues; selecting applicable requirements of the GRI business units. Standards; preventing and detecting fraud; identifying and ensuring that the Group complies with the laws and regulations applicable to its activities; selecting and applying appropriate policies; making judgments and estimates that are reasonable in the circumstances; maintaining adequate records in relation to the information included in the Report; ensuring Engagingthat staff entity: involved PJSC LUKOIL in the preparation of the ReportAudit are firm (properlyPractitioner): JSC trained, “KPMG”, a information company incorporated systems under the Laws of the Russian Federation, a member firm of the KPMG network of independent Registrationare properly No. in the Unifiedupdated State Register and ofthat Legal Entitiesany XXXchanges inmember the reportingfirms affiliated systemwith KPMG encompassInternational Cooperative all key (“KPMG 1027700035769.business units. International”), a Swiss entity.

Moscow, Russia Registration No. in the Unified State Register of Legal Entities 1027700125628.

Member of the Self-regulatory Organization of Auditors Association “Sodruzhestvo” (SRO AAS). The Principal Registration Number of the Entry in the Register of Auditors and Audit Organisations: No. 12006020351.

Engaging entity: PJSC LUKOIL Audit firm (Practitioner): JSC “KPMG”, a company incorporated under the Laws of the Russian Federation, a member firm of the KPMG network of independent Registration No. in the Unified State Register of Legal Entities XXX member firms affiliated with KPMG International Cooperative (“KPMG 174 1027700035769. International”), a Swiss entity. 175

Moscow, Russia Registration No. in the Unified State Register of Legal Entities 1027700125628.

Member of the Self-regulatory Organization of Auditors Association “Sodruzhestvo” (SRO AAS). The Principal Registration Number of the Entry in the Register of Auditors and Audit Organisations: No. 12006020351. WWW.LUKOIL.COM APPENDICES

PJSC LUKOIL PJSC LUKOIL Independent Practitioner’s Limited Assurance Report on Sustainability Report of LUKOIL Group for 2019 Independent Practitioner’s Limited Assurance Report on Sustainability Report of LUKOIL Group for 2019 Page 2 Page 3

Our Responsibilities − inspection of the processes used by PJSC LUKOIL to identify topics and issues material to the Group’s key stakeholder groups, with the purpose of understanding such processes Our responsibility is to perform procedures to obtain evidence in respect of the Report in the Group, as well as analysis of information from open sources on topics and issues prepared by Management and to report thereon in the form of a limited assurance material to key stakeholder groups of other organizations in the industry, with the purpose conclusion regarding Management’s Statement in respect of the Report based on the of determining the level of completeness of disclosure of such topics and issues in the evidence obtained. Report; We conducted our engagement in accordance with International Standard on Assurance − interviews with Management representatives and officers at the corporate center and Engagements 3000 Assurance Engagements Other Than Audits or Reviews of Historical subsidiaries regarding the sustainable development strategy and policies regulating Financial Information (ISAE 3000) issued by the International Auditing and Assurance material issues in areas of importance for the Group, stage of implementation of such Standards Board. policies, and procedures for collecting information on sustainable development; − ISAE 3000 requires that we plan and perform our procedures to obtain a meaningful level interviews with employees of the corporate center and subsidiaries responsible for of assurance about whether Management's Statement that the Report is prepared, in all providing the information for the Report; material respects, based on the “core” version of the GRI Standards and is free from − conducting procedures at the level of the following subsidiaries: material misstatement, is fairly stated. − LLC LUKOIL-West Siberia, Kogalym; − LLC LUKOIL-Komi, Usinsk; − LLC LUKOIL-Yugnefteprodukt, Krasnodar, Our Independence and Quality Control − LLC LUKOIL Uzbekistan Operating Company, Tashkent, We have complied with the independence and ethical requirements established by the which were selected based on risk analysis using qualitative and quantitative criteria; Rules on Independence of Auditors and Audit Firms and the Code of Professional Ethics for Auditors approved by the Audit Council of the Ministry of Finance of the Russian − comparing the information presented in the Report with data from other sources to Federation and by the International Code of Ethics for Professional Accountants (including determine its completeness, accuracy and consistency; International Independence Standards) issued by the International Ethics Standards Board − assessing the completeness of qualitative and quantitative information on sustainable for Accountants, which are based on fundamental principles of integrity, objectivity, development against recommendations of the GRI Standards; professional competence and due care, confidentiality and professional behavior. − reading and analyzing information on sustainable development included in the Report to We apply the International Standard on Quality Control 1, and accordingly maintain a determine whether it is in line with our understanding and knowledge of the Group’s comprehensive system of quality control including documented policies and procedures sustainable development activity; regarding compliance with ethical requirements, professional standards and applicable − recalculation of quantitative data and inspection of underlying documentation. legal and regulatory requirements. The procedures performed in a limited assurance engagement vary in nature and timing from, and are less in extent than for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower Procedures Performed than the assurance that would have been obtained had a reasonable assurance engagement been performed. The procedures selected, and our determination of the nature, timing and extent of these procedures, depend on our judgment, including the assessment of risk of material misstatement during the preparation of the Report, whether due to fraud or error, our Criteria Used understanding of the Group’s activities, as well as other engagement circumstances. In making these risk assessments, we considered internal control system relevant to the To evaluate the Report, GRI Standards were used which are available at the link: Group’s preparation of the Report in order to design procedures that are appropriate in the https://www.globalreporting.org/standards/ circumstances, but not for the purposes of expressing a conclusion as to the effectiveness of the Group’s internal control. Management's Statement Our engagement also included: assessing the appropriateness of the information included in the Report, the suitability of the criteria used by Management in preparing the Report in the circumstances of the engagement; evaluating the appropriateness of the methods, Management states that the Report is prepared, in all material respects, based on the “core” policies and procedures, used in the preparation of the Report and the reasonableness of version of the GRI Standards and is free from material misstatement. estimates made by Management. The procedures we developed based on the performed risk assessment are a combination of inspections, confirmations, recalculations, analytical procedures and inquiries. Inherent Limitations Our procedures included, but were not limited to, the following:

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APPENDIX 9. CONCLUSION OF THE BOARD OF NON-FINANCIAL REPORTING OF THE RUSSIAN UNION OF INDUSTRIALISTS AND ENTREPRENEURS ON THE PUBLIC ASSURANCE REVIEW RESULTS OF THE SUSTAINABILITY REPORT OF LUKOIL GROUP FOR 2019

The Board of Non-Financial Reporting by the Company and prepared values and strategic benchmarks, of the Russian Union of Industrialists this Conclusion in accordance governance system and structure, and Entrepreneurs (hereinafter, with the Regulations for the Public achievements the Board), established in accordance Assurance Review of Corporate and key performance results, and its with a decision of the Administrative Non-Financial Reporting approved system of interacting with stakeholders. Office (Resolution dated 28 June by the Board. Members of the Board 2007), have reviewed, at the initiative have the necessary expertise in corporate The application by the Company of PJSC LUKOIL, the Sustainability social responsibility, sustainability, of the international reporting system Report for 2019 (hereinafter, the Report) and non-financial reporting, comply is taken into account during the public of LUKOIL Group (hereinafter, with ethical requirements pertaining assurance review of the Report. the Company, Group, LUKOIL). to independence and objectivity, However, confirmation of the Report’s and express their personal opinions level of compliance with international The Company requested that the Board as experts, and not the opinion reporting systems is outside the scope perform a public assurance review of the organizations that they represent. of this Conclusion. of the Report. The Board forms an opinion on the relevance and completeness The Report was assessed The Company is responsible of the information disclosed in the Report based on the following criteria for the information and statements relating to the Company’s performance, on the completeness and relevance contained in the Report. The reliability in accordance with the principles of the information contained in it: of the data contained in the Report of responsible business practice set is not the goal of this public assurance out in the Social Charter of Russian Information is considered relevant review. Business, and whether the Report to the extent that it reflects the Company’s complies with the provisions of the UN activities in implementing the principles This Conclusion has been prepared Global Compact, as well as Russian of responsible business practices for the Company, which may use and international social responsibility disclosed in the Social Charter of Russian it for internal corporate purposes, as well standards. Business (www.rspp.ru). as for communications with stakeholders, publishing it without making any changes. In the period from 11 June to 26 June Completeness implies that the Company 2020 members of the Board studied has comprehensively presented its the contents of the Report submitted activities in the Report – its underlying

CONCLUSIONS

Based on a review of the Report, public topics for disclosure in the Report operations in foreign projects. The Report information posted on the official is described in sufficient detail, presents the Strategic Development corporate website of the Company, information is provided on procedures Program of LUKOIL Group for 2018- and a collective discussion of the results for assessing environmental and social 2027. Information on commissioning of the independent assessment aspects of suppliers and contractors of a lubricant plant in Kazakhstan, of the Report conducted by the members activities as part of tender processes, completion of the Belorechenskaya of the Board, the Board confirms and on effects of digitalization HPP reconstruction project is reported. the following: on the Company’s sustainable The Report outlines the global development are described in more trends of the industry development The LUKOIL Group Sustainability detail. Information on foreign entities, and examines the opportunities Report for 2019 contains relevant including environmental issues, for growth in the context of transitioning information on key areas of responsible is expanded. to a low-carbon economy. The Company’s business practices, in accordance production chain from oil and gas with the principles of the Social Charter The 2019 Report of the Company production to distribution of products of Russian Business, and discloses contains relevant information and services, including electric power sufficiently complete information on the following aspects of responsible and heat, is described. Information about the Company’s activity in these business practice: on the implementation of the operational areas. efficiency improvement programs, Economic freedom and responsibility: digitalization and investment program The recommendations of the Board, The Report discloses key financial is also presented. The corporate based on the results of the public and production indicators and the events governance and sustainable assurance review of the Company’s and results of the year. The Company’s development risk management previous report for 2018, are reflected structure and geographic coverage structure is described. The quality in the 2019 Report. In particular, are described in the Report, as well management system and compliance the procedure for identifying material as the expansion of the Company’s of a number of the Group’s

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entities with the requirements of the Company’s HR and social policy implemented the Environmental of Biological Diversity and Development agreements. The Report highlights the efficacy of implemented projects. of the ISO 9001:2015 international are outlined. The Report highlights Safety Program for 2019-2021, of Ecotourism”. Energy consumption the continuing priorities of social The Report highlights the Company’s standard are reported. The report the social partnership system including measures for the rational and energy efficiency data, activities, as well as the long-term nature participation in the All-Russian notes that sustainable development and indicates the coverage of employees use of associated petroleum gas and environmental expenses in Russia of a number of programs and regional Cultural and Educational Project issues are included in the Board under collective bargaining agreements. and for the reliability of pipeline and foreign entities are provided. projects financed through the LUKOIL “Talents of the Arctic. Children”. of Directors agenda, and that sustainable It is reported that the Company transportation. Information is provided The implementation of projects Charity Fund and directly by the Group The Report presents data related development management function has a system of requirements on the approval of a new Program under the World Bank’s “Zero Routine entities. The directions of the main social to the engagement of young specialists is introduced to Vice President to contractors and suppliers regarding for industrial safety, improvement Flaring by 2030” initiative is reported. and charitable programs are listed. in volunteering activities and the key for Sustainability and the Management their observance of sustainability of working conditions and safety, The Report presents information areas of volunteering campaigns. Committee, and that the decision standards in place, and information prevention and liquidation of emergency Participation in the development of local on the results of the Social and Cultural The implementation of the project “More to develop long-term climate goals on the Company’s relating control situations of the Group’s entities communities: The Report discloses Projects Competition held by the Charity than just a Purchase” aimed at supporting was made. Information is provided mechanisms is provided. The Report for 2019-2021. The Report notes the Group’s external social policy Fund together with the Group’s entities social entrepreneurs is described. Total on the four strategic objectives describes the mechanisms for client the approaches and the progress directions in regions, and the mechanisms in Russian regions, on the expansion costs on social investments in the areas of the Group in the area of sustainable engagement. Information on feedback achieved in managing climate change used, including partnerships of the contest geography to Romania. of presence are disclosed. development, which are identified channels and monitoring their satisfaction issues, as well as the decision to integrate with authorities as part of cooperation It sets out the criteria used to appraise as priorities and correlate with the UN’s is provided. The Report contains climate matters into the Strategic 11 Sustainable Development information on audits of the Company’s Development Program of the Group. Goals and 15 targets. The activities production sites by clients. The Report The Report states that the HSE of the Business Ethics Commission highlights the Company’s membership Management System has been certified CONCLUDING REMARKS are described. The characteristics in international and Russian associations for compliance with ISO 14001 of the corporate integrated and unions, and its participation and OHSAS 18001 standards, Overall, the Report provides a full expanding the information on sustainable and Gas Industry, which ensure management system are provided. in international conferences. and the transition to ISO 45001:2018 picture of the responsible business development factors in foreign entities the consistency of information across The results of the work of the Health, (instead of OHSAS 18001) practices of LUKOIL Group, its in its reports. a number of reporting cycles as well Safety and Environment Committee Human Rights: It is stated in the Report is planned in 2020. The Report strategies and governance system, as comparability with the reports of other are presented. The Report also that the Company provides zero provides information on implemented and the Company’s impact on society The Report was prepared based companies. lists the Company’s response tolerance to discrimination against measures aimed at wastewater and the environment. The Report on the reporting standards to the coronavirus COVID-19 pandemic employees on any grounds, treatment in oil and gas production applies an integrated approach of the sustainable development The 2019 Report is the Company’s in the regions of its operation and observing human rights entities, at preserving biodiversity to disclosing information across of the Global Reporting Initiative tenth non-financial report, which in the Russian Federation and abroad and freedoms the Company adheres for facilities operating in the Arctic key lines of business, including (GRI Standards), as well as on other attests to consistent progress in the first half of 2020. to international documents and to zone of the Russian Federation. It a substantial number of performance Russian and international documents, in the development of non-financial the legislation of the countries, where is reported on the collaboration indicators related to the economic, including: the UN Global Compact, information reporting process. Business partnerships: The Report it operates. Corporate documents that set with protected natural areas environmental, and social aspects. the Social Charter of Russian The Company uses various methods describes the activities and mechanisms out the principles of safeguarding human and with social environmental The Report shows the extent to which Business, the Basic Performance of independent assessment related to interactions with various rights – the Code of Business Ethics organizations, and on the hotline the Company’s performance complies Indicators of the Russian Union and of confirmation of the information stakeholder groups. It is stated that and the Social Code of PJSC LUKOIL – on environmental issues in place. with the UN’s Sustainable Development of Industrialists and Entrepreneurs, contained in the Report (professional the Company seeks to build long- are mentioned. The Report contains The main goals and directions Goals and the objectives for their the Corporate Reporting Guidelines audits and public assurance), thereby term constructive relationships based information on the observance for implementing the Company’s implementation, which are in line for Sustainable Development Goals, reaffirming its responsible approach on the principles of partnership, of labor rights of workers, including projects related to the renewable energy with the Company’s own strategy and the IPIECA Guidelines for Voluntary to ensuring the quality of the information transparency and disclosure. education and development activities, sector are presented, information benchmarks. The Company is consistently Sustainability Reporting in the Oil disclosed. The Company is reported to interact improving working conditions on participation in partner projects with government bodies and business and occupational safety. The activities is provided. It describes projects partners in Russia at federal, regional of trade unions are highlighted, as well designed to mitigate the adverse impact and local levels, and to participate as the cooperation with the International on the environment, and to reduce RECOMMENDATIONS in an international dialogue on industry Association of Trade Union Organizations or recycle waste. The Report contains development issues. The participation of PJSC LUKOIL, the International information on the Company’s successful While noting the merits of the Report, Goals-2030. We recommend to addressing climate change while of the Company’s representatives Trade Union Organization INDUSTRIA, testing of the Russian technology the Board draws the Company’s attention having the results obtained aligned ensuring economic growth alongside. in expert assessments of draft laws, and the International Labor Organization. “Beluga” for underwater pipe repair. to a number of aspects that are important with the implementation of LUKOIL’s This topic requires constant focus the work in advisory groups and expert The mechanism for addressing The principal approaches to solving for stakeholders relating to the relevance strategic goals, that the reports and highlighting in reports, and it platforms on the environmental complaints and suggestions by workers the problem of sustainable water use and completeness of the information include measurable targets for key is recommended to continue paying protection issues of, greenhouse is described. The Report comprises are described and measures to optimize disclosed, and recommends taking them sustainability areas and SDGs of priority. attention to it, disclosing information gas emissions regulation, charity information on HR audits conducted water consumption and to launch new into account in future reporting cycles. It would also be practical to highlight on the Company’s actions and achieved and labor relations are highlighted. to monitor compliance with employment water recycling systems are presented. the Company’s contribution to national results in terms of climate agenda. The Report describes the main events rights at the Group’s entities. Information The Company’s activities on biodiversity The Board notes that projects aligned with the objectives of its of the reporting period with regard is provided on the engagement conservation are highlighted. A wide the recommendations, based as they corporate programmes and specific The Report contains information to interaction with shareholders, suppliers with representatives of Indigenous range of gross and specific indicators are on an analysis of the Company’s results obtained in the subsequent on sustainability risk management issues and contractors, clients and employees. Minorities of the North concerning of the environmental impact is presented, previous reports, will prove useful reporting cycles. The presence of this in the risk management. It might be The new Shareholder Relations decision-making on projects that including indicators on the atmosphere, in the future reporting practices information in reports enhances the social advisable to accompany this information Policy of PJSC LUKOIL is introduced. affect their rights, the implementation on water resources, and on greenhouse of the Group. significance of corporate projects, with an assessment of the financial Information is provided on the Company’s of projects in support of Indigenous gas emissions. It is noted that during additionally confirming the Company’s consequences of risk mitigation measures interaction with representatives Minorities of the North, and on the costs the reporting year LUKOIL became The Report contains the analysis social responsibility. in the future, which would increase of the investment and financial for these purposes. a member of the Working Group and quantitative assessments the value of the Report for representatives communities as part of investment of the Russian Ministry of Natural of the Company’s contribution The Company holds a leading position of the investment community, financial events in different countries, and the use Environment protection: The Report Resources for the implementation to the achievement of the priority on the integration of climate agenda institutions and business partners. of feedback channels. The key principles discloses that the Company has of the federal project “Conservation UN Sustainable Development into its activities and aims at contributing

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The Report notes the systematization be continued. It is also recommended To ensure greater transparency of biodiversity conservation measures, that the data presented in dynamics of the process of identifying and selecting and criteria developed to produce be accompanied by comments material topics disclosed in reports, tangible results. We recommend that and explanations, in particular, regarding it is recommended to involve the following reports highlight this work greenhouse gas emissions. representatives of key stakeholder groups more extensively and demonstrate directly in this process in the future, which the achieved results. It is recommended to include will allow more accurately considering in the following reports the evidence their current requests and reflect them In order to provide the completeness of feedback of program participants in the reported data. of disclosed data it is recommended and give examples of their to supplement the reported information assessments regarding development The Board of Non-Financial Reporting on the extent of the contaminated and implementation of social programs. of the Russian Union of Industrialists land rehabilitation further with details This information would confirm and Entrepreneurs, after issuing of the total land area to be rehabilitated, the effectiveness of the engagement a positive assessment of the Report which which will result in better understanding mechanisms with stakeholders used supports the Company’s adherence of the Company’s tasks and results by the Company. Attention should also be to the principles of responsible business of Public Endorsement achieved. paid to enhancing the positive perception practices and highlighting the consistent of the reporting information via a wider development of the reporting, confirms of a Corporate Non-Financial Report Attention should also be paid inclusion of feedback examples, including that the LUKOIL Group Sustainability to the importance of disclosing opinions on the Company’s performance Report for 2019 has passed public information on the amount of landfilled on topical public issues pertaining assurance. waste, given the importance of these to the Company. It would be useful issues for the current environmental to include information on the Company’s agenda. For the same reason, the positive responses to various stakeholder Sustainability report practice of disclosing information requests, including those from investors. about the reliability of pipelines should of LUKOIL GROUP 2019

has received public endorsement by the RSPP Council on Non-Financial Reporting The Board of Non-Financial Reporting of the Russian A detailed opinion of the RSPP Council regarding public endorsement of the Sustainability Union of Industrialists Report of LUKOIL GROUP for 2019 has been sent to the Company, which may publish it without amendment and use it both for corporate purposes and for the purposes of stakeholder engagement.

Registration number 159.01.014.01..119

RSPP President A.Shokhin

Moscow, 2020

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APPENDIX 10. REPORTING BOUNDARIES CONTACT INFORMATION

Contact information for any matters related to the Report content:

Coordination Center for Corporate Activities Tel.: +7 (495) 981-79-77; Email: [email protected]

Investor Relations Department Tel.: +7 (495) 627-16-96; Email: [email protected]

Press Service Tel.: +7 (495) 627-16-77; Email: [email protected]

The data on future production and investment plans contained in the Report are based on forward-looking information. Such words as “believe”, “anticipate”, “expect”, “estimate”, “intend”, “plan” and similar expressions indicate the forward-looking nature of the statement. Actual results may differ from expected results, estimates and intentions contained in the forward-looking statements. LUKOIL does not guarantee that the anticipated operating results contained in the forward-looking statements will in fact be achieved. In each case, such statements represent only one of many possible outcomes, and thus they should not be considered as the most likely outcome.

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